Assessing the Allocation of Aid: Developmental Concerns and the Self-Interest of Donors

Kiel Working Paper No. 1253

42 Pages Posted: 3 Jul 2005

See all articles by Gustavo J. Canavire-Bacarreza

Gustavo J. Canavire-Bacarreza

Inter-American Development Bank (IDB); IZA Institute of Labor Economics

Peter Nunnenkamp

University of Kiel

Rainer Thiele

Kiel Institute for the World Economy

Luis Triveno

Kiel Institute for World Economics - Advanced Studies Program

Date Written: June 2005

Abstract

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.

Keywords: Foreign aid allocation, donor motives, Tobit analysis

JEL Classification: C24, F35

Suggested Citation

Canavire Bacarreza, Gustavo Javier and Nunnenkamp, Peter and Thiele, Rainer and Triveno, Luis, Assessing the Allocation of Aid: Developmental Concerns and the Self-Interest of Donors (June 2005). Kiel Working Paper No. 1253. Available at SSRN: https://ssrn.com/abstract=750284 or http://dx.doi.org/10.2139/ssrn.750284

Gustavo Javier Canavire Bacarreza

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Peter Nunnenkamp

University of Kiel ( email )

D-24100 Kiel
Germany

Rainer Thiele

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, D-24100
Germany
+49 431 8814 215 (Phone)
+49 431 8814 500 (Fax)

Luis Triveno (Contact Author)

Kiel Institute for World Economics - Advanced Studies Program ( email )

D-24105 Kiel
Germany

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