A two-part sample selection model of British bilateral foreign aid allocation

Abstract

The allocation of British bilateral foreign aid among developing countries is simultaneously modelled, focusing on allocations during the period 1980–87. Two aid allocation decisions are analysed using a variant of the Lee-Maddala econometric model. The first decision concerns the determination of developing country eligibility for aid, while the second concerns the amount of aid eligible countries are allocated. Given the implied two-part decision-making process, sample selection techniques are employed. It is hypothesized that British bilateral aid eligibility and amount decisions are based on Bristain's humanitarian, commercial and political interests in developing countries. Results obtained indicate that these decisions are generally consistent with each of these interests, especially those relating to the political importance of Commonwealth members.