The global partnership for sustainable development

This paper examines whether foreign aid, together with other economic, social and environmental factors, contributes to sustainable development. It starts with an illustrative theoretical growth model where foreign aid promotes sustainable development by protecting the environment. Using factor analysis and newly developed estimation methods for a dynamic panel data model with endogenous regressors, the empirical section of the paper finds evidence that foreign aid has had a significantly positive influence on sustainable development in aid recipient countries. This effect is very likely to go through channels related to growth and resources as well as a technology channel with respect to energy intensity. This research has important implications for a post‐2015 development framework on international collective action with regard to a sustainable future.