De-facto States and Aid Dependence: An Analysis of the Impact of Turkish Aid on the Economy of Northern Cyprus - Ahmet OZYIGIT and Fehiman EMINER


Ahmet OZYIGIT* and Fehiman EMINER**

Aid-growth literature often looks at per capita income growth as a measure of aid effectiveness. However, perceiving effectiveness merely as per capita income growth tends to disregard how income is generated or distributed. It also fails to address crucial long-run sustainability issues such as the likelihood of the recipients to manage on their own in the absence of such financial assistance. In this article, aid effectiveness in North Cyprus is analyzed both from a traditional aid-growth nexus as well as an aid-dependence perspective with a focus on the unique de-facto state-and-patron relationship, which places additional emphasis on aid-conditionality and aid-dependence. Looking at the impact of aid on consumption, trade, and government expenditure patterns, we can see evidence for aid being used as a deficit-financing tool, perpetuating the chronicity of the aid-dependent relationship rather than financing future growth and development prospects.

Keywords: Foreign Aid, Aid Effectiveness, Conditionality, Aid-Growth Hypothesis, ARDL Bounds Test


* Asst. Prof. Dr., University of Mediterranean Karpasia, Foreign Trade
** Asst. Prof. Dr., Lefke European University, Banking and Finance