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An Empirical Analysis of the Determinants of Foreign Aid: A Panel Approach

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  • Abdiweli Ali
  • Hodan Isse

Abstract

This paper uses a panel approach to examine the determinants of foreign aid. It examines the extent to which taxes on international trade and the scope of government activities, ethnicity, private credit, and education determine foreign aid. The paper specifies and estimates a model that explains the allocation of foreign aid among 151 countries over the period 1975 to 1998. The key empirical finding suggests that Taxes on Trade increases foreign aid dependency. Moreover, trade, private credit, foreign direct investment, GDP per worker, and government consumption are important determinants of foreign aid. The factors that appear to decrease foreign aid include: Years of schooling, private credit, trade, and GDP per worker. The factors that appear to increase foreign aid include: Taxes on international trade, ethnicity, and government consumption. Copyright Springer Science+Business Media, Inc. 2006

Suggested Citation

  • Abdiweli Ali & Hodan Isse, 2006. "An Empirical Analysis of the Determinants of Foreign Aid: A Panel Approach," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 12(2), pages 241-250, May.
    • Handle: RePEc:kap:iaecre:v:12:y:2006:i:2:p:241-250:10.1007/s11294-006-9016-4
    DOI: 10.1007/s11294-006-9016-4
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    5. Robert H. Bates, 1999. "Ethnicity, Capital Formation, and Conflict," CID Working Papers 27, Center for International Development at Harvard University.
    6. Laffont, Jean-Jacques & N'Guessan, Tchetche, 1999. "Competition and corruption in an agency relationship," Journal of Development Economics, Elsevier, vol. 60(2), pages 271-295, December.
    7. Krauss, Melvyn, 1997. "How Nations Grow Rich: The Case for Free Trade," OUP Catalogue, Oxford University Press, number 9780195112375, Decembrie.
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    Cited by:

    1. Jean-François BRUN & Maïmouna DIAKITE, 2016. "Tax Potential and Tax Effort: An Empirical Estimation for Non-resource Tax Revenue and VAT’s Revenue," Working Papers 201610, CERDI.
    2. Miss Nkunde Mwase, 2011. "Determinants of Development Financing Flows From Brazil, Russia, India, and China to Low-Income Countries," IMF Working Papers 2011/255, International Monetary Fund.

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    More about this item

    Keywords

    O11; O47; P51;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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