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Instrumental Philanthropy: Trade and the Allocation of Foreign Aid

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Abstract

“Trade, not aid” has long been a catchphrase in international development discourse. This paper evaluates whether the “trade, not aid” logic has driven bilateral aid allocations in practice. Using a dataset that covers development assistance from 22 donor countries to 187 aid recipients from 1980 to 2002, we find that donor countries have dispersed bilateral aid in ways that reinforce their extant bilateral commercial ties with recipient countries. Instead of “trade, not aid,” bilateral aid disbursement has followed the logic of “aid following trade.” The policy implication is that bilateral aid allocation patterns have reinforced the disadvantages of poor countries that have a limited ability to participate in international trade due to a variety of factors such as geography and a lack of tradable resources. Résumé. «Le commerce et non l'aide» est un slogan qui continue d'occuper une place importante dans le débat sur le développement international. L'article qui suit vise à évaluer la mise en pratique de ce principe dans les allocations de l'aide bilatérale. S'appuyant sur une base de données recouvrant l'aide distribuée par 22 pays donateurs à 187 pays récipiendaires entre 1980 et 2002, notre analyse révèle que l'aide a été allouée en fonction des liens commerciaux bilatéraux existants et les a renforcés. C'est donc le principe de «l'aide après le commerce» qui a prévalu. Les allocations d'aide bilatérale ont ainsi aggravé les désavantages des pays pauvres dont la capacité à bénéficier du commerce international est limitée en raison de divers facteurs, dont la situation géographique et le manque de ressources marchandes.

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... Baldwin (1969) was amongst the first researchers to point out that while there appeared to be a connection between aid and influence 2 , the exact nature of this connection is unknown. Over the years, a number of researchers as well as policy makers continue to question whether there are significant and positive effects of aid on the recipient's macroeconomic policies and growth (Alesina and Dollar, 2000;Kono and Montinola, 2015;Lundsgaarde et al., 2010). In a recent reflection on rethinking economic development, Nunn (2019) stipulates that there are several reasons to think that the adverse effects of foreign aid are being underestimated because of the unintended consequences that foreign aid may give rise to. ...
... trade policies are significant instruments for generating and reallocating wealth in the world economy and represent important ways through which developed economies can contribute to the development of disadvantaged nations (Lundsgaarde et al., 2010;Nunn, 2019). In the context of Aid, specifically, Aid for Trade (AfT) 3 programmes have received swelling interest from researchers and policy makers alike in the past decade subsequent to the formal revival of the programme in 2005 4 . ...
... However, in the classical sense, theoretical arguments indicate that aid is a more direct instrument for a donor rather than providing market access to the recipient. Lundsgaarde et al. (2010) provide evidence that donors employ aid as a complement to trade 8 . They challenge the purportedly altruistic motives of aid disbursement suggesting that aid allocation patterns have underlined the differences between developing countries with respect to possibilities of development. ...
Thesis
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This dissertation contributes to the empirical literature on trade protection through three independent chapters that have a common strand between them: use of contingent protection by trading economies of the world. In addition to tackling the conventional question on strategic determinants of contingent protection with a special focus on the role of mechanisms like retaliation (Chapter 1), this dissertation contributes two novel studies to the intertwinings of political economy with contingent protection: gendered role of national leadership (Chapter 2) and official development assistance (Chapter 3).
... Variables which measure geographical proximity (i.e. distance, Collier, Dollar 2004), language proximity (Lundsgaarde et al. 2010), and religious or cultural proximity (Alesina, Dollar 2000;Younas 2008) between a donor and a recipient also fall into this category. The theory predicts that the more intense the donors' interests and the closer the mutual relationships, the higher the volume of aid will be from the donor to that particular recipient. ...
... The economic needs of recipients are usually measured by the level of economic development, i.e. by GDP per capita or similar variables (Harrigan, Wang 2011 and many others). Social needs are described by indicators of social development, such as the infant mortality rate (Berthélemy, Tichit 2004), caloric intake (Schraeder, Hook, Taylor 1998) and literacy rate (Lundsgaarde, Breunig, Prakash 2010). The total population of recipients must also be controlled, as larger numbers of poor people in developing countries are likely to be in greater need of aid (ceteris paribus, Neumayer 2003). ...
... For example, according to Canavire et al. (2005), the significance of institutional quality as a determinant of aid depends on the variables used to measure it. Therefore in aid allocation studies, institutional quality is sometimes supplemented (or even entirely replaced) by indicators which approximate political development, such as the level of civil liberties and political rights (Berthélemy, Tichit 2004) or the type of political regime (Lundsgaarde, Breunig, Prakash 2010). However, in this respect, the empirical results are rather ambiguous. ...
Article
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This article analyzes the territorial allocation of Czech development assistance. The first part of the article (sections 2 and 3) provides an overview of the historical development and territorial aspects of Czech aid. The second part (section 4) employs regression analysis to examine the determinants of territorial allocation of Czech aid over the period 1998–2013. Czech aid flows to favoured countries in a relative proximity to Czechia and to the countries inherited from the communist era. The results of the regression analysis show that in most cases it was Czech economic and political interests that played a role in determining the allocation of Czech aid as well as some of the factors that reflect the recipients' needs and aid effectiveness.
... An extensive foreign aid literature examines why donors give, how much, and to whom (Lundsgaarde et al., 2010). Scholars have explored aid allocation in the context of climate and environmental aid as well (Hicks et al., 2008), especially mitigation aid (Halimanjaya and Papyrakis, 2015). ...
... Hypothesis 3: Support for the policy package will be higher for countries that need to adapt to sudden extreme weather events. A c c e p t e d M a n u s c r i p t Aid often has an instrumental dimension; scholars note donors often provide aid to countries they trade with (Dolšak and Dunn, 2006;Lundsgaarde et al., 2010). Arguably, public support for climate adaptation assistance might depend on Japan's bilateral economic linkages with the recipient country (Heinrich and Kobayashi, 2020;Doherty et al., 2020). ...
Article
We examine public support in Japan for overseas climate adaptation assistance via foreign aid and accepting immigrants. Using a survey-embedded conjoint experiment (N=2,815), we focus on seven attributes of an adaptation policy package: (1) the continent in which the country is located; (2) the types of extreme weather event this country faces; (3) the volume of climate aid; (4) the number of climate migrants (5) Japanese exports; (6) Japanese imports, (7) the country's record of voting with Japan in the United Nations. We find that while respondents are indifferent to aid volume, their support diminishes as the number of migrants increases. Moreover, support is higher for Asian countries, that provide export markets, vote with Japan, and where the effects of climate change are gradual. Importantly, we find that public support is not influenced by benchmarking of Japan's or peer G7 countries' past aid or immigration levels.
... Jedná se o hrubé toky pomoci z ČR do dané země za daný rok ve stálých cenách roku 2014 v amerických dolarech (USD). Abychom zredukovali sešikmení rozdělení proměnné a snížili riziko problému heteroskedasticity, pracujeme s proměnnou (ln_CZAid) v logaritmicky transformované podobě (viz například Lundsgaarde et al., 2010). 5 5 ...
... Problémem je, že v realitě je obtížné nalézt proměnnou, která ovlivňuje selekci, zatímco druhý krok neovlivňuje (a proto v druhé rovnici oprávněně chybí). 10 Ačkoliv několik málo studií alokací pomoci s Heckmanovým modelem pracuje (Lundsgaarde et al., 2010nebo Berthélemy, 2006, například Barthel et al. (2013: 14) tvrdí, že "žádná proměnná ovlivňující alokaci pomoci výše uvedenou podmínku pravděpodobně nesplňuje". 11 Proto jsme se v souladu s větší částí výzkumů teritoriálních alokací pomoci rozhodli pro aplikaci modelu Tobit ( Nyní tedy můžeme specifi kovat výchozí model pro analýzu alokace české ODA: t) . ...
Article
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Factors of Czech Aid Selection and Allocation: Panel Probit and Tobit Analysis The aim of our paper is to identify factors that influence the territorial selection and allocation of development aid of the Czech Republic. We applied random-effects probit and tobit models in our regression analysis which revealed that flows of Czech aid to individual developing countries are determined by variety of factors. Czech interests and mutual relations were mostly identified as statistically significant determinants, namely export volumes, closer historical relations and geographical proximity. The presence of Czech embassy in a country was not confirmed as a significant factor. The reflection of recipients’ needs in Czech aid selection and allocation is rather ambiguous. While Czech aid flows depend positively on total population and negatively on per capita income of recipient countries, they are positively influenced by the recipients’ level of social development. Similarly, the Czech Republic tends to give (more) aid to more democratic and freer countries with lower institutional quality.
... On one hand, international economic linkages such as trade between countries may influence aid-giving decisions. Lundsgaarde, Breunig, and Prakash (2010) found evidence that imports from developing countries to donor countries correlate with reductions in foreign aid, supporting the argument that donor countries sometimes substitute trade for aid in their relationships with developing states. Yet, on the other hand, donors may want to provide aid to countries with whom they have trading relations, primarily to support the economic interests of their firms. ...
... First, donors are not alike and may be guided by different considerations when providing foreign aid. Scholars note that some donors tend to favor aid to countries with whom they have strong trade and investment ties, while other donors are guided by humanitarian considerations (Lundsgaarde et al., 2010). Donors may also seek to reduce or increase foreign aid due to their own domestic political and economic considerations such as economic recession that lead to budgetary cutbacks or the election of a regime that is not favorably disposed toward foreign aid (as in the United States). ...
Article
Foreign aid contributes to about 10% of gross domestic product (GDP) of developing countries. To distribute aid in recipient countries, Western donors increasingly rely on nongovernmental organizations (NGOs). Yet, since the mid-1990s, 39 developing countries have adopted laws restricting the inflow of foreign aid to NGOs operating in their jurisdictions. In response to these restrictions, have bilateral donors reduced aid, either as a punishment or because they cannot find appropriate NGOs for aid delivery? We explore this question by examining a panel of 134 aid-receiving countries for the years 1993-2012. We find that all else equal, the adoption of a restrictive NGO finance law is associated with a 32% decline in bilateral aid inflows in subsequent years. These findings hold even after controlling for levels of democracy and civil liberties, which suggests that aid reduction responds to the removal of NGOs from aid delivery chains, and not to democracy recession.
... The study and consequent debate influenced traditional OECD/DAC donors who have begun to take into consideration institutional performances (or good governance) of recipient countries (Collier and Dollar 2002;McGillivray 2003;Dollar and Levin 2006;Feeny and McGillivray 2008). The political conditionality is also applied as a tool to promote democracydonors reward recipients' preference for democracy over autocracy (Lundsgaarde et al. 2010) or for a higher level of freedom (Berthélemy and Tichit 2004). This instrumental view can find support in the work of Acemoglu and Robinson (2012) who identified inclusive institutions as a prerequisite for a country's long-term development. ...
... The second category of methods takes the truncated nature of the dependent variable into account and it should be applied when there is a substantial proportion of zero allocations. There are at least three techniques that can be used: (i) the two-step procedures, i.e. probit or logit estimations in the first (selection) part, combined with OLS or panel data estimations in the second (allocation) part (Barthel et al. 2014;Berthelemy 2006); (ii) the two-step heckman method (Lundsgaarde et al. 2010;Berthelemy 2006); or (iii) the one-step tobit regressions (Dreher et al. 2009a;Canavire-Bacarreza et al. 2005, Harrigan and Wang 2011. While the heckman procedure is theoretically superior (as it allows the estimation of recipients' selection factors and aid allocation factors separately while treating them as dependent), its practical application is difficult since it requires an 'identifying restriction' (i.e. the existence of at least one variable that is significant for selection but insignificant for allocation). ...
Article
This paper seeks to bring new insights into the foreign aid allocation behaviour and patterns of two donors from the group of post-communist EU member countries, namely Poland and the Czech Republic. We use quantitative regression analysis to address Polish and Czech foreign aid objectives with a specific emphasis on geopolitical considerations and promotion of democracy. The results reveal a considerable level of similarity between Polish and Czech foreign aid allocation. Both donor countries use foreign aid to safeguard their own geopolitical self-interests—the Czech Republic and especially Poland prioritise post-Soviet countries in their aid allocations. They also prefer recipients in a relative geographic proximity. On the other hand, economic objectives are not significant drivers of Polish and Czech foreign aid. Given the recipients’ needs, the middle-income effects are evident in both countries’ aid allocations. Although support of democracy is an official objective of both donors, the level of democracy and freedom played a statistically significant role only in the allocation of overall Czech aid. A separated analysis on Polish and Czech democracy aid reveals even stronger biases of democracy aid towards former post-Soviet countries. Our research has also acknowledged the need for a more precise definition of democratic assistance.
... Refs. [6][7][8][9]83]), and may support perverse incentives either by promoting the delay of economic or political reforms by local leaders or by fostering rent seeking within recipient countries [10,11]. Evidence for allocation of ODA based primarily on need is lacking (but see Ref. [12]). ...
... Trade considerations strongly influence donor spending [5]. Commercially attractive recipient nations are much more likely to receive aid, particularly those who import goods in which donor nations have a comparative advantage in production [35], often accentuating existing inequities [10]. In the case of fisheries, access treaties have been closely tied to the allocation of development aid; key examples include access treaties enabling American, European and Japanese fleets to engage in fisheries in the waters of African, Caribbean and Pacific states [36,37]. ...
... 85 | Page DDA can be discretely discussed under planning aligned to: Donor Pressure on Development policies and strategies, donor demand beyond organization capacity and strict donor procedures. When planning for development programmes in an organization or a country and Donor pressure on policies and strategies are factored in then as Lundsgaarde, Breunig and Prakash (2010) find; countries tend to trade with and give aid to the same partners most likely because they know how to align their goals to the donor requirement. Development policies and strategies are the engine to every successful project and every development partner analyses the implementers" concept to decide whether their agenda fit. ...
... The results indicated that majority of the respondents felt that donor pressure on development policies and strategies influence performance of NGOs activities. This result concurred with the views of Lundsgaarde et al., (2010) who explained that development policies and strategies are the engine to every successful project and every development partner analyses the implementers" concept to decide whether their agenda fit. These findings show also revealed that most organizations based their performance on planning for strict donor procedures. ...
Article
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Performance measurement among NGO’s takes critical perspective within the Balanced Score Card (BSC) domain. The BSC emphasizes four dimensions which include customers’ perspectives, financial perspective, internal, business and organization learning dimension. Financial perspectives received least consideration among NGO’s due to their non-profit nature. However, this aspect needs to be given equal priority just like other components. This article attempts to demonstrate the focus given on financial components among NGO’s with livelihood orientation and operating within western Kenya. The study administered 64 questionnaires to all top management of NGO’s. The results revealed four components of financial domains in performance measurement. Accounting processes, audit processes, procurement and asset building, and budget flexibility and adjustment emerged as key issues of finance in performance evaluation base on variance accountability generated by principal axis factor analysis. The study concludes that financial perspective of performance measurement within NGOs would prioritize accounting, audit, procurement and asset building and budget flexibility and adjustment in that order. It recommends that NGO’s and stakeholder need to consider social returns on investment as a quantitative profit equivalent measure of performance.
... Numerous academic and policy analyses acknowledge the diversity of actors within the OECD-DAC community. A voluminous literature has explored heterogeneity with respect to OECD-DAC countries' aid allocation motives, for example (for an overview see Lundsgaarde et al, 2010). Many allocation studies, using McKinlay and Little (1977) as a reference point, adopt a donor interest versus recipient need dichotomy to assess varied donor preferences in using aid to support security and commercial interests or promote poverty reduction objectives. ...
Article
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The rising prominence of new state and non-state actors in development cooperation has stimulated extensive discussion over the last decade. This article reviews and critically reflects on the present and future directions of this body of scholarship. It questions the homogeneity of actor constellations, relationships and ideas as they are currently conceptualised. The article argues for the importance of adopting more analytically and conceptually diverse approaches to study the interaction between heterogeneous development actors and homogenising forces, recognising the complexity and (dis)continuities of stability and change in the field of development cooperation.
... It was found that technology and knowledge could be transferred via exports and imports and could ultimately increase economic growth (Frankel and Romer 1999). At the other extreme, the paper by Lundsgaarde et al. (2010) shows that trade and not aid determines development prospects in developing economies. They conclude that donors disbursed aid to reinforce their own commercial ties with recipient nations through trade. ...
Article
This paper investigates the short-run impact of shocks in international capital flows channeled through foreign direct investment (FDI) and foreign aid on national output and export performance in five Central Asian economies under a dynamic multivariate structural vector autoregressive (SVAR) framework. The identification of structural shocks is implemented by AB model based on IS-LM-BP postulates. The main message is that external capital shocks are persistent and small open economies are weak to absorb them. Overall, the aid shocks reduce national outputs, while FDI increase it, on average. The expansion of global demand (G20) leads to an increase in domestic GDPs, notably in Kazakhstan, Kyrgyzstan and Uzbekistan. The impact is augmented by a positive effect of FDI on export channel (and net exports) that shift the IS curve upwards. We cannot find any significant aid-FDI nexus in the region, except in Kazakhstan. The structural variance decomposition (SFEVD) results suggest that external flows and foreign demand together explain the bigger part of variability in domestic GDP and exports. Finally, variations in foreign capital, aid and FDI, are mainly explained by series themselves. The role of domestic activities is found to be weaker for aid and greater for FDI. The results could be attributed to rigid exchange rates, high trade dependence, and necessity for foreign capital to explore natural resources in Central Asian region. Our results provide some valuable suggestions to improve an investment climate for boosting economic growth.
... However, social ties between countries can have the unintended effects of enhancing global inequities. For example, Lundsgaarde et al. (2010) find that countries tend to trade with and give aid to the same partners. Such findings raise serious implications for global equity, as countries with few prospects for economic development may also receive less in the way of more benevolent forms of exchange. ...
Article
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A central tenet of economic sociology is that social ties among actors can both facilitate and constrain economic exchanges between them. Recent scholars have extended these ideas to the global system by examining how social ties formed through international organizations enable or inhibit economic exchanges between countries. Similarly, this paper examines the relationship between shared organizational memberships and bilateral aid flows between donor and recipient countries from 1978 to 2010. We propose that joint membership in international nongovernmental organizations (INGOs) and intergovernmental organizations (IGOs) facilitates aid flows from donor to recipient. However, we also suggest that this relationship is contingent upon the level of development in the recipient country. Results from a multistage analysis of more than 61,000 donor-recipient dyads show that while shared memberships strongly increase the likelihood of an aid relationship between countries, they tend to predict increased volumes of aid only for recipient countries at the lowest levels of development as measured by GDP. Findings suggest that an institutional approach is needed to fully understand the relational dynamics of aid flows in the contemporary period.
... One could identify three main motives for donors disburse foreign aid to their trading partners: strengthening export markets, supporting the implantation of donor firms in recipient economies and maintaining access to essential imports. (Lundsgaarde et al., 2010). ...
Article
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As noted in many studies of development aid there are many reasons why one might expect to observe a correlation between aid and trade flows from a donor to a particular recipient. The paper firstly presents Bulgarian participation in development cooperation to disclose the motivation for studying the relation between aid and trade. The main section summarises some insights from economic theory literature on the rationale and the potential economic gains of development assistance donors as well as the findings of a number of studies analysing the existence, direction and strength of the linkage between the dynamics and volume of development aid and international trade flows. The last section outlines the author's intentions for a future own study on this correlation.
... Освен това търговските интереси на донорите по отношение на развиващите се държави често се използват като база за сравнение на политиките и разпределението на помощта, тъй като в същината си са сходни (от чисто икономическа гледна точка) за различните донори, а и в течение на времето са относително постоянни. Идентифицирани са три основни мотива на донорите за предоставяне на помощ за развитие на търговските им партньори -подсилване на пазарите за износ, подкрепа за навлизане на фирми от страната донор в икономиката на получателя и запазване на достъп до определен ресурс (Lundsgaarde et al. 2010). Значението на търговските интереси като определящ фактор за разпределението на помощта е широко застъпено в теоретичната литература -Schraeder et al. (Schraeder et al. 1998) изследват влиянието на търговските интереси върху решенията за оказване на помощ за държавите от Африка от страна на четири страни донори през 1980 и 1989 г.; Neumayer (Neumayer 2003) включва търговските връзки като променлива в анализа си на моделите на потоците на помощ за развитие между двойки донор-получател в периода след Студената война; McGillivray и Morrissey (McGillivray & Morrissey 1998) поставят връзката между търговията и помощта за развитие в центъра на анализа на моделите за разпределение на помощ, но ограничават обекта на изследването си само до Източна Азия. ...
Conference Paper
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The paper firstly presents Bulgarian participation in development cooperation to disclose the motivation for studying the relation between aid and trade. The main section summarizes some insights from economic theory literature on the rationale and the potential economic gains of development assistance donors as well as the findings of a number of studies analyzing the existence, direction and strength of the correlation between the dynamics and volume of development aid and international trade flows. The last section outlines the author’s intentions for a future own study on this correlation.
... F r e e C h a p t e r A great many of these analyses come to the conclusion that the national interests of donors prevail when it comes to the international allocation of aid. Donor interests may be different in nature: the colonial past experience of nations (Alesina & Dollar, 2000); geographical proximity (Szent-Ivanyi, 2012); or political, security, investment, and/or trade interests -as evidenced in voting patterns at the United Nations, in donor payoffs vis-à-vis global health issues, or in the use of aid as a tool for containing migration, or for counterterrorism activities (Maizels & Nissanke, 1984;Schraeder et al., 1998;Alesina & Dollar, 2000;Berthélemy, 2006;Lundsgaarde et al., 2010;Szent-Ivanyi, 2012;Boutton & Carter, 2014;Bermeo & Leblang, 2015;Bermeo, 2017;Kisangani & Pickering, 2015;Heinrich et al., 2017;Steele, 2017;Braun & Zagler, 2018). ...
Chapter
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There is a growing perception in academia, in the development community, and in the media that arguments favouring security are gaining ground in the aid narrative. Following a review of the literature on securitisation and the motives of aid, this chapter explores the possibility of such a shift in the particular case of the European Union. By means of content analysis, we assess the prevalence of different development paradigms – social development, sustainable development, and security – as well as different aid motives – solidarity, common interests, and self-interest – in strategic aid documents of the EU as a whole (the two EU Development Consensus documents) and from a selection of key European donors (the Netherlands, the UK, Germany, and France) in two different periods. Our aim is to assess whether the weight of the various paradigms and aid motives has changed from the early 2000s (when the Millennium Development Goals were launched) to the current period, in the wake of the recent economic crisis and concurrent migration and refugees crises in the Mediterranean region.
... However, if the zero observations are taken into account as (zero) allocations, methods that can deal with the truncated nature of the dependent variable must be employed. In the allocation literature, three types of regression methods have been used: (i) the independent two-step procedures, i.e., the probit or logit method in the first stage combined with OLS or panel data methods in the second stage [31,34] ; (ii) the two-step Heckman model [31,50]; (iii) one step tobit model [22,25,26,30,51]. We opt for the tobit model not only because we must account for the zero allocations (since there are simply too many of them), but also because it can be readily used with panel data (although only with random effects). ...
Article
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This paper examines the responsiveness of foreign aid to environmental needs and performance of developing countries using, as an example, the Czech Republic. It focuses on the environmental component of foreign aid, which is defined as the development intervention of the Czech Government, which can be expected to have positive environmental impacts in target countries. The provision of environmental aid is based on the assumption that the Czech Republic has practical, transferable experience of qualitative improvements in the environment following the collapse of communist regime. Flows of environmental aid were determined by analyzing and categorizing individual development aid projects in the period 2000 to 2015. Regression analyses were employed to explain the pattern of Czech environmental aid allocations. The results show relatively limited reflection of the recipient’s environmental needs in the distribution of Czech environmental aid. Only two environmental objectives were significantly echoed in actual aid flows. The first was transfer of advanced environmental technologies and reductions in energy consumption, approximated by carbon dioxide emissions per capita. The second was protection of biodiversity, represented by the extinction risk of sets of species. The other five objectives did not play significant roles in environmental aid allocations. Above that, other factors not related to the environmental needs and performance of recipient countries affected Czech environmental aid. Among them, historical ties to other former communist countries were of high significance. The findings call into question the environmental objectives of Czech foreign aid and point to the need for transparent criteria for the allocation of environmental aid.
... These studies can be classified into several groups: (i) works on the general behaviour of groups of donors vis-à-vis either all developing countries or one region in particular; (ii) studies on the differences in the allocation pattern by institutions or channels and (iii) analyses of the motives for co-operation of one particular donor vis-à-vis all recipients. 2 The bulk of these empirical papers analyze the behaviour of the whole set of donors in relation to all recipients; and a great deal of it comes to the conclusion that national interests of donors prevail when it comes to the international allocation of aid. Donors' interests may be of a different nature: nations' colonial pasts (alesina and Dollar, 2000), geographical proximity (Szent-Ivanyi, 2012); political, security, investment and/or trade interest including, for instance, voting patterns at the United Nations (alesina and Dollar, 2000;Berthélemy, 2006;Lundsgaarde et al., 2010;Maizels and Nissanke, 1984;Schraeder et al., 1998;Szent-Ivanyi, 2012). Moreover, bilateral interests seem to dilute when aid goes via multilateral channels, according to various authors (see, for instance, Berthélemy, 2006). ...
Article
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Lack of coordination among donors poses several problems: it results in higher administrative costs for both donors and partner countries and weakens aid effectiveness. This rationale is the basis for the OECD and EU political agendas on harmonization and coordination, which has resulted in different coordination initiatives at both headquarters and field levels. However, despite the political agenda, recent studies show that for many donors and partner countries aid fragmentation has prevailed or even increased. By means of a country case study in Morocco, this document explores the obstacles to aid coordination in a specific EU development partner country. Coordination initiatives may have proliferated but not necessarily triggered results in terms of joint work or donors’ specialization. The main obstacles to coordination include varied administrative procedures; diverse administrative architectures; resistance from local authorities and also from leading donors (to abandon or share flagship aid programmes).
... In some studies, this mutual dependency of cases is captured in an analysis of the relationship between international units themselves. To address these issues, Lundsgaarde et al. (2010), for instance, employ dyadic data of foreign aid and trade flows to directly estimate the mutual influences of countries and money flows. What remains a task for all researchers is to identify and take into an account possible dependencies between cases in an international comparison. ...
Article
This paper synthesizes methodological knowledge derived from comparative survey research and comparative politics and aims to enable researches to make prudent research decisions. Starting from the data structure that can occur in international comparisons at different levels, it suggests basic definitions for cases and contexts, i. e. the main ingredients of international comparison. The paper then goes on to discuss the full variety of case selection strategies in order to highlight their relative advantages and disadvantages. Finally, it presents the limitations of internationally comparative social science research. Overall, the paper suggests that comparative research designs must be crafted cautiously, with careful regard to a variety of issues, and emphasizes the idea that there can be no one-fits-all solution.
... The research typically focuses on whether donors give more aid to relatively poor and well-governed recipient countries, or if their aid is motivated by economic and political ties between donor and recipient countries (Ohler & Nunnenkamp, 2014). The first contributions can be traced to the 1970s from McKinlay and Little (1977), while more recent prominent studies include paper by , , , , Harrigan and Wang (2011), Lundsgaarde et al. (2010). Most of the focus was on established "western" donors (i.e. ...
Conference Paper
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Foreign aid allocations have been of interest to researchers in developing economy, development studies, and development geography. Most of the available studies address development issues at countries level rather than at subnational levels within these countries. Researchers model and test the distribution of aid across recipient countries, considering recipient countries as homogenous units. This methodological approach masks an important regional heterogeneity within developing countries; therefore sub-national analyses may significantly contribute to more nuanced understanding of foreign aid. The gap in research arises from the related fact, that there has been a chronic lack of usable project-level data from developing countries. The situation has been changing only slowly over the last few years. This contribution attempts to emphasize the importance of the regional perspective in research of foreign aid allocations and to demonstrate the challenges associated with the geocoding of the Czech Republic's foreign aid projects on the example of students' seminar assignment on Czech foreign aid in Ethiopia.
... This indicates similarity of state preferences inferred from voting behaviour in the UNGA. For the economic linkage, while some studies examined the role of trade volumes in foreign aid (Lundsgaarde et al., 2010), we use a dummy variable that indicates the existence of RTAs between two countries. We obtain the RTA dummy variable from Egger and Larch (2008) and update it for 2020 by using the information on RTAs available on the WTO website. ...
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This study empirically investigates what kinds of countries imported and exported medical products during the COVID‐19 pandemic. We examine the bilateral trade values of medical products traded among 35 reporting countries and 250 partner countries between January and August in both 2019 and 2020. We shed light on four kinds of bilateral linkages, including political ties (captured by voting similarity in the United Nations), economic ties (existence of trade agreements), demographic ties (migrants), and geographic ties (distance). Our findings can be summarized as follows. An increase in COVID‐19 burden leads to decreases in exports of medical products. However, such a decrease is smaller when exporting to countries with closer political, economic, or geographical ties. In contrast, demographic ties play a key role in the import of personal protective products. Immigrants receive face masks from relatives in their home country when the immigrant’s country of residence is strongly impacted by COVID‐19.
... An extensive foreign aid literature examines why donors give, how much, and to whom (Lundsgaarde et al 2010). Scholars have explored aid allocation in the context of climate and environmental aid as well (Hicks et al 2010), especially mitigation aid (Halimanjaya and Papyrakis 2015). ...
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We examine public support in Japan for overseas climate adaptation assistance via foreign aid and accepting immigrants. Using a survey-embedded conjoint experiment (N=2,815), we focus on seven attributes of an adaptation policy package: (1) the continent in which the country is located; (2) the types of extreme weather event this country faces; (3) the volume of climate aid; (4) the number of climate migrants (5) Japanese exports; (6) Japanese imports, (7) the country’s record of voting with Japan in the United Nations. We find that while respondents are indifferent to aid volume, their support diminishes as the number of migrants increases. Moreover, support is higher for Asian countries, that provide export markets, vote with Japan, and where the effects of climate change are gradual. Importantly, we find that public support is not influenced by benchmarking of Japan’s or peer G7 countries’ past aid or immigration levels.
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Kleibl, Johannes. (2012) Tertiarization, Industrial Adjustment, and the Domestic Politics of Foreign Aid. International Studies Quarterly, doi: 10.1111/j.1468-2478.2012.00754.x © 2012 International Studies Association This paper explains the varying degrees to which commercial interests or recipients’ development needs shape donor governments’ foreign aid allocation decisions. I argue that domestic interest group politics is a major driver of the heterogeneity in donors’ aid allocation policies. As proxy measures of donor governments’ dependence on the political support of industrial producer lobbies and their susceptibility to the demands of development interest groups, I exploit variation in the level of tertiarization and in the intensity of industrial restructuring processes across donor countries and over time. While higher levels of tertiarization increase donor governments’ relative responsiveness to the aid allocation demands of development interest groups, intense periods of industrial adjustment provide incentives for governments to allocate aid in line with the preferences of their industrial producer constituencies. Statistical analyses of a dyadic panel data set of 21 OECD donor and 124 developing recipient countries for the period from 1980 to 2001 support the theoretical predictions.
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Bulgaria could take advantage of its obligations within the EU Development Policy in pursuit of its foreign and economic policy objectives. The paper first discusses some insights from the economic theory related to development aid in terms of the motivation and potential economic benefits for donor countries. It then analyses the responsibilities, the implemented actions and the potential benefits of Bulgaria's participation in international development cooperation. To conclude the paper presents some directions for the necessary future research to assist in drawing up recommendations on the strategic priorities that the country should set in its participation in international development cooperation and in particular in providing development aid.
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Performance of Non Governmental Organizations NGOs is an area that calls for comprehensive analysis especially in relation to project planning approaches. Project planning approaches can be fragmented into Need based Approach, Right Based Approach, Asset Based Community Development Approach and Donor Driven Approach. Donor Driven Approach remains silent among NGOs planning strategies due to their core mandate of facilitating community/ beneficiary initiatives. This planning approach should be openly discussed just like the other approaches in planning. This study examined Donor Driven Approach (DDA) in NGOs within Kisumu County, Kenya. A total of 123 questionnaires were administered to various managers of NGOs within the County. Some of the Key planning components that were analyzed in DDA Planning approach were; donor pressure on development policies and strategies, strict compliance with donor procedures and donor demand beyond organization capacity. The study established that the DDA allowed donors to exert much influence over the NGOs projects to the extent of controlling their performance substantially. The DDA components donor pressure on development policies and strategies, donor demand beyond organization capacity and strict donor procedures were also found to significantly influence the performance of the NGOs individually. It is, therefore, recommended that NGOs should constantly engage in capacity building in anticipation of donor demands in order to meet their expectations and in terms of performance.
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Foreign aid from the donors may or may not raise growth rates in receiving countries. In general they may increase investment but if the amount of aid is associated with conditionality of exports, that will have negative impacts on growth rates. Simulation of the analytical model shows that if TFP grows faster in the recipient countries more than in the donors then developing countreis (DCs) can converge in the capital output ratios and investment saving ratios with similar growth patterns as their advanced country (AC) donors over the long horizon. If the resource ‡ows out of the developing countries in return to aid in ‡ows this will have harmful e¤ects in growth of developing economies. Econometric estimates show that investment rather than aid was a factor contributing to growth in DCs. Exports tied to aid have been harmful for growth of recipient countries. Panel data analyses shows British aid has contributed to growth in recipient countries as British exports to Asian DCs were positively related to by their level of per capita income irrespective of the amounts of British aid to those economies.
Chapter
This chapter analyzes the patterns, dynamics, and relations between development aid and international trade of the European Union (EU) and China with Sub-Saharan African (SSA) countries for the period 2000–2012. It summarizes some theoretical insights on the relation between international trade and development aid. Then it discusses the dynamics and trends in international trade of SSA countries with EU and China and tracks the reimbursements of development aid provided by EU and China. Finally the relation between development aid and international trade in the cases of the EU and China is assessed using cointegration approach. The results show that while there is no evidence for direct relation between EU’s aid and trade, in the case of China “trade creates aid”.
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Games that appear to be independent, involving none of the same players, may be related by emotions of reciprocity between the members of the same groups. In the real world, individuals are members of groups and want to reward or punish those groups whose members have been kind or unkind to members of their own. In this paper, we extend Dufwenberg and Kirchsteiger’s model of sequential reciprocity (Games Econ Behav 47(2):268–298, 2004) to groups of individuals and define a new “sequential group reciprocity equilibrium” for which we prove its existence. We study the case of two games with two players in each game, where each player belongs to the same group as a player in the other game. We show that when the payoffs of one game are much higher than the payoffs of the other, the outcome of the game with higher payoffs determines the outcome of the other game. We also find that when the payoffs are very asymmetric, the outcome where the sum of the payoffs is maximized is a sequential group reciprocity equilibrium.
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In diesem Beitrag werden die Logik und Anwendungsfelder von quantitativen Studien mit einer großen Fallzahl (Groß-N-Studien) in der Politikwissenschaft vorgestellt. Durch eine systematische Analyse mit möglichst vielen Fällen gilt es, ein Modell mit hoher Erklärungskraft, entweder für alle Variablenzusammenhänge oder für einen ausgewählten Teil der Variablen, zu finden. Dabei steht das Aufdecken und Verstehen der Gesamtheit der empirischen Muster in den vorliegenden Daten über alle Beobachtungen hinweg im Vordergrund, während die Analyse einzelner Fälle in den Hintergrund tritt. Nach einer Einführung in den Prozess und die Anwendung von Groß-N-Studien in der Politikwissenschaft werden den Leserinnen und Lesern die breiten Möglichkeiten sowie die Grenzen der Vorgehensweisen aufgezeigt.
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Development assistance represents one mechanism for the redistribution of global wealth. This article examines key external challenges that the development aid systems in the EU currently confront. Among the most important elements of the changing backdrop against which decisions on preparing EU development cooperation for the future will be made are the increasing differentiation of countries within the developing world and the rise of new global development actors, and the growing prominence of issue linkages between security and development and the environment and development. These challenges raise important questions for the EU concerning the future rationale and organization of development assistance.
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Objective. This study investigates the trends in the distribution of environmental aid from the U.S. Agency for International Development (USAID), U.S. foundations, and a multilateral donor, the Global Environmental Fund (GEF), to determine whether aid is driven by donor interests or recipient need. Methods. Data from USAID, the Foundation Center, GEF, and other secondary sources are analyzed using logistic and OLS regressions. Results. Traditional donor interests (politics, economics, and security) and donors’ environmental interests (those favoring “global” environmental concerns over local ones) explain which nations receive environmental aid and which do not and how much nations receive. In general, the allocation of environmental aid differs from that of official development assistance. The United States does not demonstrate a middle–income bias; multilateral aid is not more “humanitarian” than bilateral aid. Foundations’ allocation patterns favor traditional donors interests. Conclusions. Environmental aid does not target the nations that are most in need of abating local pollution. Instead, environmental aid donors favor nations with whom they have had prior relations (economic and security), nations that are democratic, and nations with unexploited natural resources. In short, donor interests outweigh recipient need.
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Researchers have analysed the relationship between aid and trade flows from donors to recipients to address one of two questions: (a) do donors use aid to increase their trade with recipients (aid leads to trade)? (b) Is trade a determinant of aid allocation decisions of donors (trade leads to aid)? As the 'aid and trade' relationship is bilateral, it may differ between donor and recipient pairs. For some pairs (a) may apply, for others (b), for others both and for others neither. This paper argues that appropriate testing for the nature of the aid and trade relationship must allow and 'test for these alternatives. Rather than pooling all observations into a sample to test for (a) or (b), which is shown to give misleading results, one should test if the underlying relationship differs in sub-samples. Using appropriate pooled samples, we find no evidence that tied aid increases trade, although donors providing a higher share of aid tend to trade more with the recipient. In terms of aid allocation, donors appear to be concerned with relative aid and trade shares rather than absolute volumes.
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This study explores the donor side of debates revolving around the proper role of foreign assistance as a foreign policy tool, by empirically testing for the aid determinants of four industrial democracies: France, Japan, Sweden, and the United States. A pooled cross-sectional time-series design is employed to assess the impacts of six sets of variables on aid flows to thirty-six African states during the 1980s. Three sets of these variables--humanitarian need, strategic importance, and economic potential--are constructed using data traditionally employed in empirical foreign aid studies. Three additional sets of variables--cultural similarity, ideological stance, and region--are constructed from data that regional specialists consider to be important in the foreign aid equation. Although no two cases are alike, one can nevertheless draw some tentative conclusions about the nature of the foreign aid regime of the final cold war decade of the 1980s on the basis of several cross-national patterns. In short, the results (1) contradict rhetorical statements of northern policymakers who claim that foreign aid serves as an altruistic foreign policy tool designed to relieve humanitarian suffering; (2) confirm the expected importance of strategic and ideological factors in a foreign aid regime heavily influenced by the cold war; and (3) underscore the importance of economic, particularly trade, interests in northern aid calculations.
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What's wrong with development aid? It is argued that much of aid's failure is related to the institutions that structure its delivery. These institutions govern the complex relationships between the main actors in the aid delivery system, and often generate a series of perverse incentives that promote inefficient and unsustainable outcomes. The theoretical insights of the new institutional economics are applied to several settings. First, the institutions of Sida, the Swedish aid agency, is investigated to analyze how that aid agency's institutions can produce incentives inimical to desired outcomes, contrary to the desires of its own staff. Second, cases from India, a country with low aid dependence, and Zambia, a country with high aid dependence, are used to explore how institutions on the ground in recipient countries might also mediate the effectiveness of aid. Suggestions are offered on how to improve aid's effectiveness. These include how to structure evaluations in order to improve outcomes, how to employ agency staff to gain from their on-the-ground experience, and how to engage stakeholders as 'owners' in the design, resource mobilization, learning, and evaluation process of development assistance programs. © C. Gibson, K. Andersson, E. Ostrom, and S. Shivakumar, 2005. All rights reserved.
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This paper briefly surveys the existing literature on the motivations of overseas aid. The emphasis is on the two competing models of recipient need and donor interest, and the paper estimates these two models using data for Australian bilateral aid. Both the recipient need model and the donor interest model are supported by the econometric analysis. This is in stark contrast to the results of other studies for “large” states, such as the United States and the United Kingdom. These prior studies show no support for the recipient need model whereas the donor interest model is supported. The atypical result for the Australian bilateral aid program requires further analysis in terms of non-nested hypotheses.
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This paper examines the relationship between foreign aid and growth in real GDP per capita as it emerges from simple augmentations of popular cross-country growth specifications. It is shown that aid in all likelihood increases the growth rate, and this result is not conditional on ‘good’ policy. There are, however, decreasing returns to aid, and the estimated effectiveness of aid is highly sensitive to the choice of estimator and the set of control variables. When investment and human capital are controlled for, no positive effect of aid is found. Yet, aid continues to impact on growth via investment. We conclude by stressing the need for more theoretical work before this kind of cross-country regression is used for policy purposes.
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It is often claimed that the post-World War II trading order has been relatively liberal, and much effort has been invested in explaining why it has not become more closed in the aftermath of Bretton Woods. Investigation of actual imports (as opposed to policy instruments designed to influence imports (reveals that the advanced capitalist states were no more open to imports or multilateral in their trading patterns in 1948-1972 than in 1921-1938 or 1881-1913. In the current (post-1972) era, openness in terms of trade volumes has increased substantially, but the increase in openness in terms of trade values has been more modest. Contrary to some recent theorizing, the degree of openness is generally unrelated to a number of plausible measures of "concentration" in the international system. It is, however, related in more recent eras to previously experienced rates of economic growth. Incomplete evidence for regionalization in trade flows shows little difference between 1948-1972 and the interwar period. Some measures of bilateral balancing in trade currently meet or exceed those experienced in the 1930s. Heterodox transactional forms--countertrade and intra-firm trade--have become a significant proportion of global trade. This development, rather than the achievement of a "liberal" order, seems to be the most noteworthy characteristic of the current era.
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Since 1960, the French African Policy has been based on a military, economic, and cultural cooperation. Behind the official goal, that of development aid, lie the French geopolitical priorities. Since general de Gaulle, the French diplomacy is obsessed by the international place of France in the World. The influence of France in Africa is an integral part of this. Therefore the cooperation between France and Africa is clientelist : the economic and financial aid provided by France is exchanged with the French privilege of an economic and political influence within the African states, which includes military support in situations of border conflict and even domestic « disorder ». This conception of the relationship between France and Africa has not really changed with the French presidents who have followed general de Gaulle. Consequently, the French government institutions of cooperation with Africa have been in the same situation since the sixties. The result is such a complex, obsolete and inefficient labyrinth that the real execution of French African policy is carried out in non-official political and business networks. A radical reform of this policy is now necessary, due to the new international context : the end of the Cold War, the French involvment in the European process, and the increasing dependance of Africa on the Bretton Woods institutions.
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Although researchers have recently made some progress in explaining the outputs of the US economic aid decision-making process, their efforts to explain the allocation of US military aid have been rather disappointing. In this article, we follow previous studies that have assumed a two-stage process leading up to the allocation of military aid, while making three significant improvements over those efforts. First we employ a better model, including a variety of political, strategic, economic, and humanitarian variables we hypothesize to be related to the allocation of military aid. Second, we solve the `low n' difficulty that plagued previous research, by employing an extensive dataset that covers a global sample of countries covering the 1983-8 period. And third, unlike previous research where a two-stage process has been assumed, we employ a methodology that solves the difficulties associated with selection bias, which arises when two interrelated decisions are modeled separately. As a result of these improvements our results are much stronger than those of previous studies. We find that strategic, political, and economic interests, as well as human rights concerns and economic development, have been considered in the US military aid decision-making process.
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China's vastly increased involvement in Africa over the past decade is one of the most significant recent developments in the region. It appears to contradict the idea of international marginalisation of Africa and brings significant economic and political consequences. China's Africa interest is part of a recently more active international strategy based on multipolarity and non-intervention. Increased aid, debt cancellation, and a boom in Chinese-African trade, with a strategic Chinese focus on oil, have proven mutually advantageous for China and African state elites. By offering aid without preconditions, China has presented an attractive alternative to conditional Western aid, and gained valuable diplomatic support to defend its international interests. However, a generally asymmetrical relationship differing little from previous African–Western patterns, alongside support of authoritarian governments at the expense of human rights, make the economic consequences of increased Chinese involvement in Africa mixed at best, while the political consequences are bound to prove deleterious.
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We examine some issues in the estimation of time-series cross-section models, calling into question the conclusions of many published studies, particularly in the field of comparative political economy. We show that the generalized least squares approach of Parks produces standard errors that lead to extreme overconfidence, often underestimating variability by 50% or more. We also provide an alternative estimator of the standard errors that is correct when the error structures show complications found in this type of model. Monte Carlo analysis shows that these "panel-corrected standard errors" perform well. The utility of our approach is demonstrated via a reanalysis of one "social democratic corporatist" model.
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The end of the Cold War has provided scholars of international relations with a unique opportunity to evaluate the explanatory power of their models in a rapidly changing environment. We provide a preliminary, exploratory test of the system-level, societal-level, and state-level explanations of U.S. foreign policy behavior during and after the Cold War. We seek to determine which among the foreign policy goals suggested by these approaches best explains one important aspect of U.S. foreign policy—the provision of foreign assistance. The hypotheses are tested on a pooled, cross-sectional, time series of U.S. foreign aid allocation from 1977 through 1994. While we find a great deal of similarity in the relative importance of the three approaches in explaining U.S. behavior in both eras, we also show that the security-driven goals of the systemic approach have become less critical and the ideological goals of the state-centered model more important with the passing of the Cold War.
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This book, by one of the world's leading experts on dynamic panel data, presents a modern review of some of the main topics in panel data econometrics. The author concentrates on linear models, and emphasizes the roles of heterogeneity and dynamics in panel data modelling. The book combines methods and applications, so will appeal to both the academic and practitioner markets. The book is divided in four parts. Part I concerns static models, and deals with the problem of unobserved heterogeneity and how the availability of panel data helps to solve it, error component models, and error in variables in panel data. Part II looks at time series models with error components. Its chapters deal with the problem of distinguishing between unobserved heterogeneity and individual dynamics in short panels, modelling strategies of time effects, moving average models, inference from covariance structures, the specification and estimation of autoregressive models with heterogeneous intercepts, and the impact of assumptions about initial conditions and heteroskedacity on estimation. Part III examines dynamics and predeterminedness. Its two chapters consider alternative approaches to estimation from small and large T perspectives, looking at models with both strictly exogenous and lagged dependent variables allowing for autocorrelation of unknown form, models in which the errors are mean independent of current and lagged values of certain conditioning variables but not with their future values. Together Parts II and III provide a synthesis, and unified perspective, of a vast literature that has had a significant impact on recent econometric practice. Part IV reviews the main results in the theory of generalized method of moments estimation and optimal instrumental variables. Available in OSO: http://www.oxfordscholarship.com/oso/public/content/economicsfinance/0199245290/toc.html
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Research into foreign aid has mostly focused on its ability to affect economic (i.e., GDP per capita) growth. Conclusions have been mixed. I consider aid’s effectiveness differently: by its ability to improve quality of life. I find that, though aid does not affect quality of life in the aggregate, it is effective when combined with democracy, and ineffective (and possibly harmful) in autocracies. The results suggest that aid would be more effective if it were combined with efforts to encourage democratization.
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This paper attempts to identify the underlying principles of aid allocation, and particularly the balance of motivations as between the needs of recipient countries and the interests of donor countries. Two alternative models are fitted by cross-country regressions to bilateral and multilateral aid flows to some 80 developing countries in 1969–1970 and 1978–1980. The first (recipient need) model assumes that all aid is given to compensate for shortfalls in domestic resources. This model provides a reasonable explanation for the distribution of multilateral aid, but it is clearly not applicable for bilateral aid flows. The second (donor interest) model assumes that all aid serves only donor interests, defined to cover political/security investment and trade interests. This model gives generally good explanations of bilateral aid, but is a poor fit for multilateral aid. The relative importance of the various donor interests differs sharply among donors. The paper ends with an analysis of the shift in the balance of aid over the 1970s towards the recipient need element, and with a reference to the sharp change in policy in the 1980s towards increasing emphasis on donor interest aid.
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Critics of foreign aid programs have long argued that poverty reflects government failure. In this paper I test predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes. I find that aid does not significantly increase investment, nor benefit the poor as measured by improvements in human development indicators, but it does increase the size of government. The impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive. But liberal political regimes and democracies, ceteris paribus, have on average 30% lower infant mortality than the least free regimes. This may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs. An implication is that short-term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs.
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This paper presents specification tests that are applicable after estimating a dynamic model from panel data by the generalized method of moments (GMM), and studies the practical performance of these procedures using both generated and real data. Our GMM estimator optimally exploits all the linear moment restrictions that follow from the assumption of no serial correlation in the errors, in an equation which contains individual effects, lagged dependent variables and no strictly exogenous variables. We propose a test of serial correlation based on the GMM residuals and compare this with Sargan tests of over-identifying restrictions and Hausman specification tests.
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As from 1999, published as the first issue of the year of the DAC Journal. Depuis 1999, publiés en tant que premier numéro de l'année des dossiers du CAD
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Practically all donor countries that give aid claim to do so on the basis on the recipient's good governance, but do these claims have a real impact on the allocation of aid? Are democratic, human rights-respecting, countries with low levels of corruption and military expenditures actually likely to receive more aid than other countries? Using econometric analysis, the author examines the factors that really determine the patterns of aid giving. The author analyses such examples as: Aggregate aid flows. Aid from multilateral organisations such as the EU and the UN. Aid from bilateral donors such as Germany, Japan, the US as well as Arab donors. This concise, well argued and well researched book will be a great read for students, academics and policy-makers involved in development studies, economics and international relations.
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This paper studies the pattern of allocation of foreign aid from various donors to receiving countries. We find considerable evidence that the direction of foreign aid is dictated as much by political and strategic considerations, as by the economic needs and policy performance of the recipients. Colonial past and political alliances are major determinants of foreign aid. At the margin, however, countries that democratize receive more aid, ceteris paribus. While foreign aid flows respond to political variables, foreign direct investments are more sensitive to economic incentives, particularly "good policies" and protection of property rights in the receiving countries. We also uncover significant differences in the behavior of different donors. Copyright 2000 by Kluwer Academic Publishers
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Objective This study investigates the trends in the distribution of environmental aid from the U.S. Agency for International Development (USAID), U.S. foundations, and a multilateral donor, the Global Environmental Fund (GEF), to determine whether aid is driven by donor interests or recipient need. Methods Data from USAID, the Foundation Center, GEF, and other secondary sources are analyzed using logistic and OLS regressions. Results Traditional donor interests (politics, economics, and security) and donors' environmental interests (those favoring “global” environmental concerns over local ones) explain which nations receive environmental aid and which do not and how much nations receive. In general, the allocation of environmental aid differs from that of official development assistance. The United States does not demonstrate a middle-income bias; multilateral aid is not more “humanitarian” than bilateral aid. Foundations' allocation patterns favor traditional donors interests. Conclusions Environmental aid does not target the nations that are most in need of abating local pollution. Instead, environmental aid donors favor nations with whom they have had prior relations (economic and security), nations that are democratic, and nations with unexploited natural resources. In short, donor interests outweigh recipient need.
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I provide an overall empirical assessment of the motivations of ODA granted by rich countries to developing countries, as revealed by aid allocation behaviors. Aid motives combine self-interested and altruistic objectives. I use a three-dimensional panel dataset, combining the donor, recipient and time dimensions, which shows a lot of heterogeneity in donor behavior. Thanks to the width of this dataset, I can test differences of parameters among donors and, in particular, compare their degrees of altruism. Switzerland, Austria, Ireland and most Nordic countries are among the most altruistic. Australia, France, Italy, and to some extent Japan and the United States are among the most egoistic. Copyright © 2006 The Author; Journal compilation © 2006 Blackwell Publishing Ltd.
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The widely publicized finding that "aid promotes growth in a good policy environment" is not robust to the inclusion of new data or alternative definitions of "aid," "policy" or "growth." The idea that "aid buys growth" is on shaky ground theoretically and empirically. It doesn't help that aid agencies face poor incentives to deliver results and underinvest in enforcing aid conditions and performing scientific evaluations. Aid should set more modest goals, like helping some of the people some of the time, rather than trying to be the catalyst for society-wide transformation.
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Proponents and critics alike agree that the policies spawned by the Washington Consensus have not produced the desired results. The debate now is not over whether the Washington Consensus is dead or alive, but over what will replace it. An important marker in this intellectual terrain is the World Bank’s Economic Growth in the 1990s: Learning from a Decade of Reform (2005).With its emphasis on humility, policy diversity, selective and modest reforms, and experimentation, this is a rather extraordinary document demonstrating the extent to which the thinking of the development policy community has been transformed over the years. But there are other competing perspectives as well. One (trumpeted elsewhere in Washington) puts faith on extensive institutional reform, and another (exemplified by the U.N. Millennium Report) puts faith on foreign aid. Sorting intelligently among these diverse perspectives requires an explicitly diagnostic approach that recognizes that the binding constraints on growth differ from setting to setting.
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Critics of foreign aid programs argue that these funds often support corrupt governments and inefficient bureaucracies. Supporters argue that foreign aid can be used to reward good governments. This paper documents that there is no evidence that less corrupt governments receive more foreign aid. On the contrary, according to some measures of corruption, more corrupt governments receive more aid. Also, we could not find any evidence that an increase in foreign aid reduces corruption. In summary, the answer to the question posed in the title is 'no.'