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Does Korea follow Japan in foreign aid? Relationships between aid and foreign investment

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  • Kang, Sung Jin
  • Lee, Hongshik
  • Park, Bokyeong

Abstract

Korea, an emerging donor country, largely considers its economic relations to recipients when allocating its aid. Such practices were preceded by Japan before the 1990s. We expect those similar practices between the two countries will make resemblance in aid outcomes. On a macro-level, we show similarities in aid allocations by type, region, income, and sector. The similarities are ascertained also at a micro-level by our statistical analysis on the relationships between aid and FDI. The analysis based on the FDI gravity model and panel dynamic system GMM estimation shows that only aids from Korea and Japan create more inflow of FDI into their respective recipient developing countries. Those are contrasted with other donors' aids, which are not related to FDI or the substitute for FDI.

Suggested Citation

  • Kang, Sung Jin & Lee, Hongshik & Park, Bokyeong, 2011. "Does Korea follow Japan in foreign aid? Relationships between aid and foreign investment," Japan and the World Economy, Elsevier, vol. 23(1), pages 19-27, January.
    • Handle: RePEc:eee:japwor:v:23:y:2011:i:1:p:19-27
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Emerging Partners: Anything but ‘Rogue Aid’
      by Shifting Wealth in ShiftingWealth on 2011-05-03 20:17:00

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    7. Kisang Kim & Esther S. Choi & Suh-Yong Chung, 2023. "Mainstreaming Climate Change into Emerging Donor’s Official Development Assistance: The Case of South Korea," Progress in Development Studies, , vol. 23(1), pages 44-64, January.
    8. Bokyeong Park & Hongshik Lee, 2015. "Motivations for Bilateral Aid Allocation in Korea: Humanitarian, Commercial, or Diplomatic?," Asian Economic Papers, MIT Press, vol. 14(1), pages 180-197, Winter/Sp.
    9. Liao, Hongwei & Chi, Yedi & Zhang, Jiarui, 2020. "Impact of international development aid on FDI along the Belt and Road," China Economic Review, Elsevier, vol. 61(C).
    10. Van Der Sluis, E. & Durowah, O., 2018. "Aid for Trade and Foreign Direct Investment: Effects on Poverty Reduction," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277307, International Association of Agricultural Economists.
    11. Liu, Ailan & Wang, Zhixuan & Zhu, Pengcheng, 2021. "Does informal economy undermine the effects of China’s aid on its outward foreign direct investment?," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 315-329.
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