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Of Donor Coordination, Free-Riding, Darlings, and Orphans: The dependence of bilateral aid on other bilateral giving

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  • Ronald B. Davies

    (University College Dublin)

  • Stephan Klasen

    (Georg-August-University Göttingen)

Abstract

Using data from 1988 to 2007, we examine to what extent bilateral aid flows of an individual donor to a country depend on aid flows from all other bilateral and multilateral donors to that country. We thereby want to assess to what extent donor coordination, free-riding, selectivity, specialization, and common donor motivations drive bilateral aid allocation as these determinants would point to different dependence structures. Using approaches from spatial econometrics and controlling for endogeneity, we find that other bilateral flows lead to a significant increase in aid flows from a particular donor. The effects are particularly pronounced for recipients in Africa and the Middle East and socalled donor ‘orphans’ who seem to be collectively shunned by bilateral aid donors. The positive dependence also seems be related to donors following the lead of the largest donors. Over time, the positive dependence has become smaller. Overall the results suggest that donor coordination and free-riding are quantitatively less important than common donor interests and selectivity.

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Bibliographic Info

Paper provided by Courant Research Centre PEG in its series Courant Research Centre: Poverty, Equity and Growth - Discussion Papers with number 137.

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Date of creation: 18 Mar 2013
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Handle: RePEc:got:gotcrc:137

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Keywords: aid; donor coordination; aid darlings; aid orphans;

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  1. Bulír, Ales & Hamann, A. Javier, 2008. "Volatility of Development Aid: From the Frying Pan into the Fire?," World Development, Elsevier, vol. 36(10), pages 2048-2066, October.
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  3. Iñaki Aldasoro & Peter Nunnenkamp & Rainer Thiele, 2009. "Less Aid Proliferation and More Donor Coordination? The Wide Gap between Words and Deeds," Kiel Working Papers 1516, Kiel Institute for the World Economy.
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  6. Collier, Paul & Dollar, David, 1999. "Aid allocation and poverty reduction," Policy Research Working Paper Series 2041, The World Bank.
  7. Stefaan Marysse & An Ansoms & Danny Cassimon, 2007. "The Aid 'Darlings' and 'Orphans' of the Great Lakes Region in Africa," European Journal of Development Research, Taylor and Francis Journals, vol. 19(3), pages 433-458.
  8. Finn Tarp & Christian F. Bach & Henrik Hansen & Søren Baunsgaard, 1998. "Danish Aid Policy: Theory and Empirical Evidence," Discussion Papers 98-06, University of Copenhagen. Department of Economics.
  9. Emmanuel Frot & Javier Santiso, 2011. "Herding in Aid Allocation," Kyklos, Wiley Blackwell, vol. 64(1), pages 54-74, 02.
  10. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
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