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Aid Effectiveness: Politics Matters

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  • Matteo Bobba
  • Andrew Powell

Abstract

The literature on aid effectiveness has focused more on recipient policies than the determinants of aid allocation yet a consistent result is that political allies obtain more aid from donors than non-allies. This paper shows that aid allocated to political allies is ineffective for growth, whereas aid extended to countries that are not allies is highly effective. The result appears to be robust across different specifications and estimation techniques. In particular, new methods are employed to control for endogeneity. The paper suggests that aid allocation should be scrutinized carefully to make aid as effective as possible.

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Bibliographic Info

Paper provided by Inter-American Development Bank in its series IDB Publications with number 6725.

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Date of creation: Jan 2007
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Handle: RePEc:idb:brikps:6725

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Related research

Keywords: Public Utilities; WP-601;

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Cited by:
  1. Axel Dreher & Vera Eichenauer & Kai Gehring, 2013. "Geopolitics, Aid and Growth," CESifo Working Paper Series, CESifo Group Munich 4299, CESifo Group Munich.
  2. Kilby, Christopher & Dreher, Axel, 2010. "The impact of aid on growth revisited: Do donor motives matter?," Economics Letters, Elsevier, Elsevier, vol. 107(3), pages 338-340, June.
  3. Axel Dreher & Anna Minasyan & Peter Nunnenkamp, 2013. "Government Ideology in Donor and Recipient Countries: Does Political Proximity Matter for the Effectiveness of Aid?," Kiel Working Papers, Kiel Institute for the World Economy 1870, Kiel Institute for the World Economy.

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