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Determinants of the Allocation of US Aid forTrade


  • Badassa Tadasse
  • Bichaka Fayissa


Since the 2001 Doha Round of multilateral trade negotiations, members of the World Trade Organization (WTO) have shown a renewed interest in using a new type of aid known as aid for trade (hereafter to be simply referred as AFT) as a means for catapulting the economic growth performance of developing countries. Japan, U.S., and the United Kingdom account for a significant proportion of AFT outlays being extended to developing countries. Despite the rise in the amount of funding outlays, to date, there is little information as to what determines the allocation of the AFT funds to different countries and the impact of the aid on the economic performance of the recipient developing economies. Using data on U.S. AFT outlays extended to a panel of 54 developing countries during 1999-2005, this study identifies some salient donor and recipient specific factors that influence the propensity and intensity of AFT allocation. Our study indicates that the share of AFT given to a country is greater: the larger is the relative magnitude of the donor’s exports to the recipient country, the more vulnerable the recipient country is to external economic shocks, the more politically globalized and landlocked the recipient is, the lower the level of economic freedom enjoyed by the citizens of the recipient country, and the higher the amount of the traditional Non-AFT aid per capita inflow is to the country. On the other hand, both the propensity and intensity of U.S. AFT falls with a rise in the recipient country’s ability to serve as a source for U.S. import supply and the more integrated it is with the rest of the world.

Suggested Citation

  • Badassa Tadasse & Bichaka Fayissa, 2009. "Determinants of the Allocation of US Aid forTrade," Working Papers 200901, Middle Tennessee State University, Department of Economics and Finance.
  • Handle: RePEc:mts:wpaper:200901

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    References listed on IDEAS

    1. James A. Dunlevy, 2006. "The Influence of Corruption and Language on the Protrade Effect of Immigrants: Evidence from the American States," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 182-186, February.
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    More about this item


    Aid for trade; capacity building; export promotion; economic growth;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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