Abstract
Results of the CDI and QODA evaluation developed by OECD showed that Korea’s aid presented low efficiency compared to other aid countries. However, these methods represent a qualitative assessment of the effectiveness of each country’s aid and are not applicable to the evaluation of actual aid projects and the identification of causes of the inefficiency. Therefore, it is needed to grasp the reality of Korea’s aid and to identify the cause of aid inefficiency to set up a better ODA policy. The purpose of this study is to improve the effectiveness of Korea’s Official Development Assistance (ODA) provided to developing countries. To do this, we analyzed the efficiency of ODA provided to 33 recipient countries by Korea through data envelopment analysis method. The effects of three factors, illiteracy, integrity, and GDP, on efficiency were also investigated by utilizing a Tobit regression analysis. As a result of the DEA efficiency analysis, it was found that the average efficiency was about 65.74%. By region, the average efficiency scores of Asia, Africa, Central and South America, and Middle East and Eastern Europe were about 47.8%, 78.9%, 70.4%, and 62.7%, respectively. This indicates that Asian countries are inefficient compared to countries from other regions. It was also found that GDP, integrity, and illiteracy have positive effects on efficiency. The methodology proposed in this study can be used for other studies to create an aid policy that produces efficient results.
Highlights
Official Development Assistance (ODA) is a type of official transaction and concessional fund aimed at promoting the economic and social development of developing countries [1]
As a result of analyzing the factors affecting the efficiency, the GDP, which indicates the economic level of the recipient country, has a positive effect on the efficiency of ODA at the 1% significance level
This means that the better the economic base of the beneficiary country, the higher the efficiency of aid that can be expected
Summary
Official Development Assistance (ODA) is a type of official transaction and concessional fund aimed at promoting the economic and social development of developing countries [1]. When there is a high dependency on foreign countries due to a lack of resources like in Korea, it is more important to establish mutual trust and cooperation with developing countries. For this reason, ODA is important for Korea’s economic interests as well. According to Jo [3], Korea’s reputation has improved due to the humanitarian educational aid that Korea has supplied to developing countries. This better impression of Korea will be directly related to the favorability of Korean products. The main purpose of ODA is in humanitarianism, strengthened ties between the donor and recipient countries can lead to an increase in the favorability of donor goods, which in turn can lead to an increase in donor countries’ exports to recipient countries [2,4]
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