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Assessing the allocation of aid : developmental concerns and the self-interest of donors

  • Canavire-Bacarreza, Gustavo
  • Nunnenkamp, Peter
  • Thiele, Rainer
  • Triveño, Luis

In this paper, we perform a Tobit analysis of aid allocations, covering the period 1999-2002 and accounting for both altruistic and selfish donor motives. We first compare the allocative behavior of all bilateral donors taken together with that of multilateral aid agencies, and then look at nine major bilateral donors individually. It turns out that poorer countries get clearly more aid from both bilateral and multilateral donors, with the possible exception of France and Japan. Most bilateral donors and the multilateral agencies are also found to direct significantly more aid to well governed recipients if governance is measured by the World Bank?s CPIA. If the CPIA is replaced by the Kaufmann index, however, the policy orientation of aid becomes extremely weak. In contrast to a recent paper by Dollar and Levin (2004), our estimates do neither suggest that multilateral aid is more poverty and policy oriented than bilateral aid, nor that IDA performs particularly well within the group of multilateral donors. Post-conflict resolution, the third altruistic motive considered in the paper, emerges as a significant determinant of aid allocations in 2002. The importance of selfish aid motives clearly differs between bilateral and multilateral donors. We find no evidence that donor countries were able to push through their individual trade and political interests at the multilateral level. By contrast, the export-related self interest of DAC countries provided a fairly strong incentive to grant bilateral aid, as did colonial ties.

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Paper provided by Kiel Institute for the World Economy (IfW) in its series Open Access Publications from Kiel Institute for the World Economy with number 3983.

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Date of creation: 2006
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Handle: RePEc:zbw:ifwkie:3983
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  1. Dollar, David & Alesina, Alberto, 2000. "Who Gives Foreign Aid to Whom and Why?," Scholarly Articles 4553020, Harvard University Department of Economics.
  2. 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.
  3. Alberto Alesina & Beatrice Weder, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," American Economic Review, American Economic Association, vol. 92(4), pages 1126-1137, September.
  4. Dollar, David & Levin, Victoria, 2004. "Increasing selectivity of foreign aid, 1984-2002," Policy Research Working Paper Series 3299, The World Bank.
  5. Chang, Charles C. & Fernandez-Arias, Eduardo & Serven, Luis, 1999. "Measuring aid flows : a new approach," Policy Research Working Paper Series 2050, The World Bank.
  6. Eric Neumayer, 2005. "Is the Allocation of Food Aid Free from Donor Interest Bias?," Journal of Development Studies, Taylor & Francis Journals, vol. 41(3), pages 394-411.
  7. Berthelemy, Jean-Claude & Tichit, Ariane, 2002. "Bilateral Donors' Aid Allocation Decisions: A Three-dimensional Panel Analysis," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  8. 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.
  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. Collier, Paul & Hoeffler, Anke, 2004. "Aid, policy and growth in post-conflict societies," European Economic Review, Elsevier, vol. 48(5), pages 1125-1145, October.
  11. 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).
  12. 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.
  13. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
  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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