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A Dynamic Model of Foreign Aid Allocation

  • Fumitaka Furuoka


    (Universiti Malaysia Sabah)

This paper uses the Generalized Method of Moments (GMM)-type of estimator of Arellano and Bond (1991) to analyze the dynamics of adjustment in foreign aid allocation over the period 2000-2005. The empirical findings reveal a complex nature of foreign aid allocations. On the one hand, the static panel data models indicated that aid donors tended to provide larger amounts of foreign aid to the poorer developing nations which were in a greater need for the development assistance. On the other hand, the dynamic panel data models indicated contradicted results, where relatively wealthy developing countries have received larger amounts of foreign aid.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 15 (2008)
Issue (Month): 8 ()
Pages: 1-13

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Handle: RePEc:ebl:ecbull:eb-08o10012
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  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  2. Wansbeek, Tom & Kapteyn, Arie, 1989. "Estimation of the error-components model with incomplete panels," Journal of Econometrics, Elsevier, vol. 41(3), pages 341-361, July.
  3. Svensson, Jakob, 1998. "Foreign aid and rent-seeking," Policy Research Working Paper Series 1880, The World Bank.
  4. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
  5. Subhayu Bandyopadhyay & Howard J. Wall, 2006. "The determinants of aid in the post-cold war era," Working Papers 2006-021, Federal Reserve Bank of St. Louis.
  6. Dudley, Leonard & Montmarquette, Claude, 1976. "A Model of the Supply of Bilateral Foreign Aid," American Economic Review, American Economic Association, vol. 66(1), pages 132-42, March.
  7. Trumbull, William N & Wall, Howard J, 1994. "Estimating Aid-Allocation Criteria with Panel Data," Economic Journal, Royal Economic Society, vol. 104(425), pages 876-82, July.
  8. Eric Neumayer, 2003. "Do Human Rights Matter in Bilateral Aid Allocation? A Quantitative Analysis of 21 Donor Countries," Social Science Quarterly, Southwestern Social Science Association, vol. 84(3), pages 650-666.
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