Abstract

Purpose: This study aims to identify the factors that influence the quality of aid provided by donors.
 Originality: Unlike existing aid effectiveness research that mainly focuses on institutional improvements in recipient countries, this study focuses on enhancing aid quality of donors for aid effectiveness. It also differentiates itself from previous studies by adopting a more comprehensive approach to defining and analyzing aid quality rather than treating it as a single factor.
 Methodology: The dependent variable, aid quality, is measured through principal component analysis of five variables from the QuODA dataset. The independent variables consist of five factors influencing aid quality: institutional, structural, macro-economic, strategic importance, and aid volume factor. Panel regression analysis with a fixed effect model was conducted on 22 OECD DAC bilateral donors over the five years(2008, 2009, 2012, 2016, 2019) for which the CGD collected QuODA data.
 Result: Peer pressure and income level of donors were found to have a statistically significant effect on aid quality. Consistent with the original hypothesis, increased pressure from other countries was associated with higher aid quality. Contrary to the original hypothesis, however, higher income level of donors was associated with lower aid quality.
 Conclusion and Implication: Creating a competitive environment that allows for comparison of aid effectiveness among donors can enhance aid quality by motivating donors to refine their aid policies and practices. In addition, economically wealthier donors can improve aid quality by expanding their contributions to multilateral aid, ensuring that aid policies and practices are closely aligned with the needs of recipient countries.

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