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Export Upgrading in Donor and Recipient Countries and Bilateral Development Aid Allocation

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  • Sèna Kimm Gnangnon

Abstract

This paper contributes to the literature on aid allocation by investigating whether export product upgrading (export product diversification and export quality improvement) in both donors and aid recipient-countries matters for donors' aid allocation. The analysis is conducted in a gravity type framework model over a panel dataset comprising 23 donor-countries and 126 recipient-countries over the period 1970-2010. The study uses both within fixed effects and fixed effects quantile regression estimators to perform the analysis. The empirical results suggest evidence that export product diversification in donor-countries does not influence their bilateral aid supply, but an improvement in their overall export quality does generate higher bilateral aid to recipient-countries. In the meantime, while export product diversification in recipient countries does not influence the bilateral aid these countries receive from donors, bilateral aid supplied by donors declines when recipient-countries experience higher overall export quality improvement. Finally, the impact of export upgrading in recipient-countries on the bilateral aid received from donors is dependent upon recipient-countries' level of economic development, proxied by their real per capita income.

Suggested Citation

  • Sèna Kimm Gnangnon, 2018. "Export Upgrading in Donor and Recipient Countries and Bilateral Development Aid Allocation," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 15(2), pages 249-276, December.
  • Handle: RePEc:liu:liucej:v:15:y:2018:i:2:p:249-276
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