Determinants of bilateral official development assistance

2018

Partner country selection is one of the key elements of development policy. It lies at the centre of the development policy decision-making of donor countries and institutions, and plays a significant role in shaping the patterns of official development assistance (ODA) allocation. The existing literature on ODA allocation has either a focus on how it should be (normatively) organised, on which determinants are (ex post) responsible for aid flows by using regression analysis looking for causal relationships, or stands somewhere between them. We argue that there is a gap in the literature in terms of analysing whether the actual flows of ODA reflect donors’ stated intentions in partner country selection. It is the aim of this paper to analyse the partner country selection approaches of selected members of the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) during the last years, their principles in development policy-making and how their approach is reflected in the formulae applied. The European Union, France, Germany, Japan, the Netherlands, Sweden, the United Kingdom and the United States, which roughly share 70 per cent of the total ODA flows by all DAC donors, were chosen as case studies. In a descriptive analysis, we consider how aid allocation is organised by each donor, focusing on primary institutions/agencies, decision-making processes, and the principles/basic formulae applied in selecting partner countries. A map of the donors in terms of their intentions and allocation/actual flows is drawn. While principles are considered to shape intentions, interests and other confounding factors affect actual flows. In addition, the donors are compared by looking at three aspects of their approaches: firstly, whether donors are strategically-motivated (that is, whether they have security concerns, foreign policy and economic interests as the main motivation in their partner country selection) or follow development-oriented approaches (focusing on recipient-needs); secondly, whether they follow an explicitly stated agenda; and, thirdly, whether intentions are consistent with the actual ODA flows. Looking at these aspects, we suggest that 1) not every donor follows a clear approach in partner country selection; 2) actual ODA flows do not always reflect the stated intentions; and 3) most of the time, donors follow a mixture of development-oriented and strategic approaches.

2012

Asian Survey, 2022

As a donor, the Republic of Korea emphasizes five sectors as primary targets for official development assistance—education, health, governance, agriculture, and industry and energy—which contributed to its own rapid economic growth; that is, the country uses its own development experience as a development assistance model. This study examines the determinants of Korean ODA allocation for each of these sectors. We hypothesize that Korea is likely to allocate more targeted ODA to countries with less achievement in these sectors, and that this tendency is stronger for low-income countries. Using disaggregated Korean ODA allocation data for 2006 to 2015, we find that while the income of recipient countries generally has a significant effect on the allocation of ODA to each sector, the level of development of that particular sector does not appear to have systematic effects on allocations. This null finding may be due to the lack of coordination among the country’s many ODA institutions ...

This paper examines whether Official Development Assistance (ODA) is disproportionately allocated to countries that need to make the most progress on the Millennium Development Goals (MDGs). We expect MDG-sensitive distribution of foreign aid – or a good donor-recipient match – to be guided by the principles of the Global Partnership for Development. When we apply the MDG-sensitivity criteria for aid allocation, the results indicate that ODA allocation since the Millennium Declaration has become more MDG-sensitive – ODA is given to countries that need it most. While such trends in aid disbursements are commendable, total aid flows, however, fall short of promised levels. JEL Classification: F35, O1, D63, C43 Keywords: ODA, aid, MDGs, aid distribution

Economics Bulletin, 2012

Theoretical Economics Letters, 2022

This study provides a comparative analysis of the main determinants of large shifts in aid allocation by major donors, namely China, France, the United Kingdom, and the United States. In contrast to continuing assistance, significant year-over-year variation of allocated aid to a given recipient is considered a new and deliberate decision by the donors. Using a version of quantile regression to account for heterogeneity in the characteristics of aid recipients, we show that significant differences exist in the aid allocation strategies of the major donors. There is no conditionality attached to Chinese aid, while self-economic interests and corruption levels at home and in the recipient countries determine aid allocated by France and the U.K. to their former colonies. In addition, recipient needs affect aid from France, the U.K., and the U.S. Over the 2000-2014 period, there is no significant change in the determinants of aid allocation by China in response to various criticisms of its approach. Confronted with the growing influence of emerging donors such as China, the three major traditional donors seem to adjust their aid allocation policy towards their own economic interests.

2018

Partner country selection is one of the key elements of development policy. It lies at the centre of the development policy decision-making of donor countries and institutions, and plays a significant role in shaping the patterns of official development assistance (ODA) allocation. The existing literature on ODA allocation has either a focus on how it should be (normatively) organised, on which determinants are (ex post) responsible for aid flows by using regression analysis looking for causal relationships, or stands somewhere between them. We argue that there is a gap in the literature in terms of analysing whether the actual flows of ODA reflect donors’ stated intentions in partner country selection. It is the aim of this paper to analyse the partner country selection approaches of selected members of the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) during the last years, their principles in development policymaking a...

Review of World Economics, 2007

The Pakistan Development Review

Research on the topic of distribution of foreign aid among recipients is regaining momentum. This is understandable in the light of the knowledge that presently the richest 40 percent of the developing world receives twice as much aid per capita as the poorest 40 percent [UNDP (1994)], while once upon a time foreign aid was sought to accomplish exactly the opposite. The distribution of official development assistance (ODA) is conventionally studied in terms of two models: the ‘recipient needs’ model and the ‘donor interest’ model. In the first, foreign aid flows are seen to satisfy the socio-economic needs of the recipient countries. In the second, national interests of donors, whether these are military, political or commercial, are seen to determine the direction and size of the foreign aid. Empirical studies were made to ascertain and understand whether, on balance, foreign aid is motivated by recipient need or donor interest. There is one class of studies, for example, Mcgillivr...

SSRN Electronic Journal, 2005

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.