This paper investigates whether aid flows to developing countries fit well with their development priorities. In particular, we examine aid allocation across sectors in a given recipient country by using sectoral data on aid and indicators that measure the recipient's need for aid in each sector. The data show that inter-recipient aid allocation reflects the recipient's need. However, we found no evidence that inter-sectoral allocation fits with national priorities except in high- and middle-income East Asian countries. Our evidence shows that the quality of bureaucracy and corruption in recipient countries impede efficient inter-sectoral allocation.
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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number
08039.
Length: 34 pages Date of creation: Nov 2008 Date of revision: Handle: RePEc:eti:dpaper:08039
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