Abstract
The proper allocation of foreign aid is likely to be of critical importance to its efficacy. In this paper, I present an analysis to test the hypothesis that official development assistance is allocated based on need in terms of deficit on sustainable development indicators. Within the framework of sustainable development priorities, I analyze data from over a hundred countries from 2012-2017 for multilateral and bilateral disbursements and 26 indicators. Using a novel mismatch index, I identify average misallocations of about 2% of the world total for countries, representing dozens of billions of dollars in aggregate, and observe little change after the 2015 enactment of the SDGs. I also check Spearman rank coefficient measures which indicate a poor fit, especially for indicators new to the SDG agenda. In regression analysis, I find a positive relation between aid and need and that the quality of institutions and domestic resource mobilization is associated with aid while democracy is not. Finally, I identify and discuss disproportionate nations, mainly large population and middle-income nations. I offer several explanations and potential extensions.
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