Official Development Assistance: The Effectiveness Of Altruistic Motivation

The literature has long attempted to study the conditions for the effectiveness of Official development assistance (ODA); however, the conclusions remain ambiguous. This article proposes a cross-country study of ODA effectiveness, taking into account both the donor’s motivation and the recipient’s initial state. Econometric analysis of data from 1991–2019 for 59 recipients showed that for countries with well-developed governance systems, aid is effective regardless of motivation and volume, though its marginal utility diminishes. The result confirms the importance of the recipient country’s initial state for aid effectiveness and the idea that development incentives fade with external funding. In countries with underdeveloped governance systems, ODA is beneficial only with altruistic motives and substantial volumes; otherwise, it leads to a decline in economic growth rate. The result supported the hypothesis that such a recipient cannot resist a donor pursuing self-serving interests or cope with the negative consequences of aid, particularly the Dutch disease syndrome. Substantial volumes of altruistic aid, indicative of donors’ attention to ODA implementation mechanisms, can prevent negative effects. The results expand understanding of the necessary conditions for effective aid delivery.