Kiel Working Papers, Kiel Institute for World Economics
No 1253:
Assessing the Allocation of Aid: Developmental Concerns and the Self-Interest of Donors
Gustavo Canavire, Peter Nunnenkamp, Rainer Thiele and Luis Triveño
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; (follow links to similar papers)
JEL-Codes: C24; ; F35; (follow links to similar papers)
40 pages, June 2005
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