Abstract
This research examines the impact of foreign funds on improvements in the quality of life in nations most dependent on external finance. Utilizing Official Development Assistance (ODA) and Foreign Direct Investment (FDI) as proxies, we compare differences between two groups of nations: the 30 with highest ODA to gross national income (GNI) ratio to the 30 with the highest FDI to GDP ratio. With controls for governance and industrial upgrading, we conduct a comparative dynamic model analysis as well as a descriptive typology of the changes in economic growth in both groups. We find that ODA was especially effective in increasing life expectancy, but not improving mortality rates while increasing FDI decreased under-5 mortality rates, but had no effect on life expectancy. The results have implications for race-to-the-bottom policy analysis, aid dependence discourse, and value extraction research. We discuss why we observe positive outcomes of aid in certain quality of life improvements in relation to the international proliferation of INGO management. We also provide insight on the growing debate of the merits of FDI recruitment as a structural adjustment policy goal.