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Danish Aid Policy: Theory and Empirical Evidence

Author

Listed:
  • Finn Tarp

    (University of Copenhagen Institute of Economics)

  • Christian F. Bach

    (University of Copenhagen Institute of Economics)

  • Henrik Hansen

    (The Royal Veterinary and Agricultural University, Frederiksberg, Denmark)

  • Søren Baunsgaard

    (University of Copenhagen Institute of Economics)

Abstract

This paper is a study of Danish aid policy from the early 1960s to 1995. It includes (i) a review of officially stated aims and criteria, (ii) a descriptive analysis of actual behaviour in international comparative perspective, (iii) a review of the theoretical and empirical aid allocation literature, and (iv) a series of panel data regressions to further explore how Danish bilateral aid was, in actual fact, distributed country-by-country. A theoretical model explaining how the allocation process took place is also formulated. It underpins the empirical analysis from which it transpires that a two step model is a useful way of analysing Danish aid allocations. The first step is whether to select a country or not, and the second involves the decision of how much aid to commit. The empirical analysis demonstrates that Danish aid has been guided in both steps by officially stated aims and criteria in an expected and statistically significant manner although a clear Eastern and Southern Africa bias was found. Another general result is that the relative weights of the explanatory variables have varied both from year-to-year and between sub-periods.

Suggested Citation

  • Finn Tarp & Christian F. Bach & Henrik Hansen & Søren Baunsgaard, 1998. "Danish Aid Policy: Theory and Empirical Evidence," Discussion Papers 98-06, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:9806
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    File URL: http://www.econ.ku.dk/english/research/publications/wp/1998/9806.pdf/
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    References listed on IDEAS

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    1. 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.
    2. Gang, Ira N. & Lehman, James A., 1990. "New directions or not: USAID in Latin America," World Development, Elsevier, vol. 18(5), pages 723-732, May.
    3. McGillivray, M. & White, H., 1993. "Explanatory studies of aid allocation among developing countries : a critical survey," ISS Working Papers - General Series 18942, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    4. Finn Tarp & Mads Váczy Kragh, 1995. "Danish Balance of Payments Support," Discussion Papers 95-16, University of Copenhagen. Department of Economics.
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    Citations

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    Cited by:

    1. Ronald B. Davies & Stephan Klasen, 2013. "Of Donor Coordination, Free-Riding, Darlings, and Orphans: The Dependence of Bilateral Aid on Other Bilateral Giving," CESifo Working Paper Series 4177, CESifo Group Munich.
    2. McGillivray, Mark, 2003. "Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations," WIDER Working Paper Series 071, World Institute for Development Economic Research (UNU-WIDER).
    3. Channing Arndt & Sam Jones & Finn Tarp, 2009. "Aid and Growth: Have We Come Full Circle?," WIDER Working Paper Series WIDER Discussion Paper 20, World Institute for Development Economic Research (UNU-WIDER).
    4. Fink, Guenther & Redaelli, Silvia, 2009. "Determinants of international emergency aid - humanitarian need only ?," Policy Research Working Paper Series 4839, The World Bank.
    5. Jean-Claude Berthélemy, 2006. "Bilateral Donors' Interest vs. Recipients' Development Motives in Aid Allocation: Do All Donors Behave the Same?," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 179-194, May.
    6. Emmanuel Frot & Javier Santiso, 2011. "Herding in Aid Allocation," Kyklos, Wiley Blackwell, vol. 64(1), pages 54-74, February.
    7. Jean-Claude Berthélemy, 2004. "Bilateralism and multilateralism in official development assistance policies," Cahiers de la Maison des Sciences Economiques bla04104, Université Panthéon-Sorbonne (Paris 1).
    8. Gravier-Rymaszewska, Joanna, 2012. "How Aid Supply Responds to Economic Crises: A Panel VAR Approach," WIDER Working Paper Series 025, World Institute for Development Economic Research (UNU-WIDER).
    9. Round, Jeffery I. & Odedokun, Matthew, 2003. "Aid Effort and its Determinants," WIDER Working Paper Series 003, World Institute for Development Economic Research (UNU-WIDER).
    10. 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.
    11. Feeny, Simon, 2003. "What Determines Foreign Aid to Papua New Guinea? An Inter-temporal Model of Aid Allocation," WIDER Working Paper Series 005, World Institute for Development Economic Research (UNU-WIDER).
    12. repec:ucm:wpaper:04-08 is not listed on IDEAS
    13. Sergio Tezanos Vázquez, 2008. "The Spanish pattern of aid giving," Working Papers del Instituto Complutense de Estudios Internacionales 0804, Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales.
    14. Akinkugbe, Oluyele, 2003. "Flow of Foreign Direct Investment to Hitherto Neglected Developing Countries," WIDER Working Paper Series 002, World Institute for Development Economic Research (UNU-WIDER).
    15. Kleemann, Linda & Nunnenkamp, Peter & Thiele, Rainer, 2014. "Gender inequality, female leadership, and aid allocation: A panel analysis of aid for education," WIDER Working Paper Series 010, World Institute for Development Economic Research (UNU-WIDER).
    16. repec:unu:wpaper:wp2012-25 is not listed on IDEAS
    17. Mark McGillivray, 2005. "What determines African bilateral aid receipts?," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(8), pages 1003-1018.
    18. Mark McGillivray, 2003. "Modelling Aid Allocation: Issues, Approaches And Results," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 28(1), pages 171-188, June.
    19. Jeffery I. Round & Matthew Odedokun, 2010. "Aid Effort and its Determinants," Working Papers id:3211, eSocialSciences.

    More about this item

    Keywords

    Danish foreign aid; modelling aid allocation; panel data analysis;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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