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A Dynamic Model of Foreign Aid Allocation

Author

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  • Fumitaka Furuoka

    () (Universiti Malaysia Sabah)

Abstract

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.

Suggested Citation

  • Fumitaka Furuoka, 2008. "A Dynamic Model of Foreign Aid Allocation," Economics Bulletin, AccessEcon, vol. 15(8), pages 1-13.
  • Handle: RePEc:ebl:ecbull:eb-08o10012
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    File URL: http://www.accessecon.com/pubs/EB/2008/Volume15/EB-08O10012A.pdf
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    References listed on IDEAS

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    1. Subhayu Bandyopadhyay & Howard J. Wall, 2007. "The determinants of aid in the post-cold war era," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 533-548.
    2. Trumbull, William N & Wall, Howard J, 1994. "Estimating Aid-Allocation Criteria with Panel Data," Economic Journal, Royal Economic Society, vol. 104(425), pages 876-882, July.
    3. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
    4. Svensson, Jakob, 2000. "Foreign aid and rent-seeking," Journal of International Economics, Elsevier, vol. 51(2), pages 437-461, August.
    5. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    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 132-142, March.
    7. 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.
    8. 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.
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    Cited by:

    1. Mohamed Mounir Sraieb, 2015. "An Empirical Model for U.S. Foreign Aid Allocation," Working Papers ECARES ECARES 2015-48, ULB -- Universite Libre de Bruxelles.

    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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