Does Foreign Aid Impact the Development of Private Entrepreneurship in Cameroon?

Abstract

This paper observes that the effect of foreign aid on private entrepreneurship is controversial. To this end, it assesses the effect of foreign aid on private entrepreneurship development in Cameroon amongst other factors. Data was obtained from the World Bank Development Indicators (WDI) for the period 1980 to 2014.The error correction technique was used to estimate the parameters of private entrepreneurship development in Cameroon. The result showed that there is a positive and significant effect of foreign aid on private entrepreneurship in Cameroon in the long run. In addition, private entrepreneurship was found to increase with increase in real gross domestic product both in the short and long run. Government investment impacted negatively private entrepreneurship in the short and in the long run in Cameroon. From a policy perspective, an important conclusion is that government authorities should improve on the efficiency of foreign aid in order to reduce the lag time this aid takes to exert a significant effect on entrepreneurship development in Cameroon.

Key words: Foreign aid, Private entrepreneurship, Error correction model, Cameroon.

DOI: 10.7176/DCS/10-5-06

Publication date:May 31^st 2020