Assessing the Allocation of Italian Foreign Aid

32 Pages Posted: 28 Sep 2009

Date Written: March 27, 2009

Abstract

This paper provides an assessment of Italian aid policy during the period 1983-2006. In comparison with other donors (DAC and G-7), the main stylized facts are: persistently lower aid/GDP ratio, greater recourse to multilateral channels, a higher percentage of “tied” flows and relatively greater recourse to debt relief. Drawing on the empirical literature on aid allocation, we estimate the determinants of Italy’s bilateral aid. We use three groups of explanatory variables, reflecting national-interest, humanitarian and selectivity-related motivations. We find that the distribution of Italian bilateral resources is significantly affected by both national-interest (like foreign policy or trade) and humanitarian motives, related to recipients’ needs; the latter’s role, in particular, seems to have strengthened over time. There is ample room for improving selectivity, i.e., the capacity to direct ODA flows to “deserving” countries, where better policies and institutions are likely to increase aid effectiveness.

Keywords: Italian foreign aid, aid allocation, donor motives, economic development

JEL Classification: F35, O1

Suggested Citation

Maurini, Claudia and Settimo, Riccardo, Assessing the Allocation of Italian Foreign Aid (March 27, 2009). Bank of Italy Occasional Paper No. 43, Available at SSRN: https://ssrn.com/abstract=1479512 or http://dx.doi.org/10.2139/ssrn.1479512

Claudia Maurini

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Riccardo Settimo (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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