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Empirical Evidence on the New International Aid Architecture

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  • Cassimon, Danny
  • Claessens, Stijn
  • Campenhout, Bjorn van

Abstract

We conduct an empirical study on how 22 donors allocate their bilateral aid among 147 recipient countries over the 1970-2004 period to investigate whether recent changes in the international aid architecture-at the international and country level-have led to changes in donor behavior. We find that after the fall of the Berlin Wall and especially in the late nineties, bilateral aid responds more to economic needs and the quality of a country?s policy and institutional environment and less to debt, size and colonial and political linkages. We also find more selectivity by donors when a country uses a PRSP and passes the HIPC decision point. Importantly, PRSPs and HIPCs reduce the perverse effects of large bilateral and multilateral debt shares on aid flows, suggesting less defensive lending. Overall, it appears certain international aid architecture changes have led to more selectivity in aid allocations. The specific factors causing these changes remain unclear, however. And since there remain (large) differences among donors in selectivity that appear to relate to donors? own institutional environments, reforms will have to be multifaceted. --

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Bibliographic Info

Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Göttingen 2007 with number 2.

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Date of creation: 2007
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Handle: RePEc:zbw:gdec07:6525

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Keywords: development aid; aid allocation; selectivity; debt relief; HIPC; PRSP; aid architecture;

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Citations

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Cited by:
  1. Thorsten Drautzburg & Inna Melnykovska & Rainer Schweickert, 2008. "Which Membership Matters? External vs. Internal Determinants of Institutional Change in Transition Countries," Kiel Working Papers, Kiel Institute for the World Economy 1421, Kiel Institute for the World Economy.
  2. Powell, Robert & Bird, Graham, 2010. "Aid and Debt Relief in Africa: Have They Been Substitutes or Complements?," World Development, Elsevier, Elsevier, vol. 38(3), pages 219-227, March.
  3. Danny Cassimon & Bjorn Van Campenhout, 2008. "Multiple Equilibria in the Dynamics of Financial Globalization," WEF Working Papers, ESRC World Economy and Finance Research Programme, Birkbeck, University of London 0044, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
  4. Belke, Ansgar & Bordon, Ingo & Melnykovska, Inna & Schweickert, Rainer, 2009. "Prospective NATO or EU Membership and Institutional Change in Transition Countries," IZA Discussion Papers 4483, Institute for the Study of Labor (IZA).
  5. Nkunde Mwase, 2011. "Determinants of Development Financing Flows From Brazil, Russia, India, and China to Low-Income Countries," IMF Working Papers, International Monetary Fund 11/255, International Monetary Fund.
  6. Ezequiel Cabezon & Tej Prakash, 2008. "Public Financial Management and Fiscal Outcomes in Sub-Saharan African Heavily-Indebted Poor Countries," IMF Working Papers, International Monetary Fund 08/217, International Monetary Fund.
  7. World Bank & International Monetary Fund, 2010. "Global Monitoring Report 2010 : The MDGs after the Crisis," World Bank Publications, The World Bank, number 2444, August.
  8. Ansgar Belke & Ingo Bordon & Inna Melnykovska & Rainer Schweickert, 2009. "Prospective Membership and Institutional Change in Transition Countries," Kiel Working Papers, Kiel Institute for the World Economy 1562, Kiel Institute for the World Economy.
  9. HEPP, Ralf, 2010. "CONSEQUENCES OF DEBT RELIEF INITIATIVES IN THE 1990s," Applied Econometrics and International Development, Euro-American Association of Economic Development, Euro-American Association of Economic Development, vol. 10(1).
  10. Yongzheng Yang & Nkunde Mwase, 2012. "BRICs’ Philosophies for Development Financing and their Implications for LICs," IMF Working Papers, International Monetary Fund 12/74, International Monetary Fund.
  11. Thorsten Drautzburg & Andrea Gawrich & Inna Melnykovska, 2008. "Institutional Convergence of CIS Towards European Benchmarks," CASE Network Reports, CASE-Center for Social and Economic Research 0082, CASE-Center for Social and Economic Research.

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