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Assessing the Allocation of Aid: Developmental Concerns and the Self-Interest of Donors

  • Gustavo Canavire
  • Peter Nunnenkamp
  • Rainer Thiele
  • Luis Triveño

In this paper, we perform a Tobit analysis of aid allocation, covering the period 1999- 2002 and accounting for both altruistic and selfish donor motives. It turns out that poorer countries get clearly more aid from both bilateral and multilateral donors. Most donors are also found to direct significantly more aid to well-governed recipients if governance is measured by the World Bank’s Country Policy and Institutional Assessment (CPIA). If the CPIA is replaced by the Kaufmann index on institutional conditions in recipient countries, however, the policy orientation of aid becomes extremely weak. In contrast to a recent paper by Dollar and Levin, our estimates do not suggest that multilateral aid is more poverty- and policy-oriented than bilateral aid. Post-conflict resolution emerges as a significant determinant of aid allocation in 2002. The importance of selfish aid motives clearly differs between bilateral and multilateral donors. In particular, the export-related self-interest of donor countries provided a fairly strong incentive to grant bilateral aid, as did colonial ties.

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File URL: https://www.ifw-members.ifw-kiel.de/publications/assessing-the-allocation-of-aid-developmental-concerns-and-the-self-interest-of-donors-1/kap1253.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1253.

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Length: 40 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:kie:kieliw:1253
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  1. Collier, Paul & Hoeffler, Anke, 2002. "Aid, policy, and growth in post-conflict societies," Policy Research Working Paper Series 2902, The World Bank.
  2. Alesina, Alberto & Weder, Beatrice, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," Scholarly Articles 4553011, Harvard University Department of Economics.
  3. Berthelemy, Jean-Claude & Tichit, Ariane, 2004. "Bilateral donors' aid allocation decisions--a three-dimensional panel analysis," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 253-274.
  4. Collier, Paul & Dollar, David, 2001. "Can the World Cut Poverty in Half? How Policy Reform and Effective Aid Can Meet International Development Goals," World Development, Elsevier, vol. 29(11), pages 1787-1802, November.
  5. Collier, Paul & Dollar, David, 1999. "Aid allocation and poverty reduction," Policy Research Working Paper Series 2041, The World Bank.
  6. Michael A. Clemens & Steven Radelet, 2003. "The Millennium Challenge Account: How Much is Too Much, How Long is Long Enough?," Working Papers 23, Center for Global Development.
  7. Eric Neumayer, 2005. "Is the allocation of food aid free from donor interest bias?," LSE Research Online Documents on Economics 16689, London School of Economics and Political Science, LSE Library.
  8. Peter Nunnenkamp & Rainer Thiele, 2006. "Targeting Aid to the Needy and Deserving: Nothing But Promises?," The World Economy, Wiley Blackwell, vol. 29(9), pages 1177-1201, 09.
  9. Oecd, 2003. "Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations," OECD Journal on Development, OECD Publishing, vol. 4(3), pages 7-40.
  10. Chang, Charles C. & Fernandez-Arias, Eduardo & Serven, Luis, 1999. "Measuring aid flows : a new approach," Policy Research Working Paper Series 2050, The World Bank.
  11. Alberto Alesina & David Dollar, 1998. "Who Gives Foreign Aid to Whom and Why?," NBER Working Papers 6612, National Bureau of Economic Research, Inc.
  12. Dollar, David & Levin, Victoria, 2004. "Increasing selectivity of foreign aid, 1984-2002," Policy Research Working Paper Series 3299, The World Bank.
  13. McGillivray, Mark, 2003. "Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  14. Oecd, 2002. "Aid volume, channels and allocations for poverty reduction," OECD Journal on Development, OECD Publishing, vol. 3(3), pages 33-46.
  15. Rolf J. Langhammer, 2004. "Halving Poverty by Doubling Aid: Is There Reason for Optimism?," The World Economy, Wiley Blackwell, vol. 27(1), pages 81-98, 01.
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