Sector Specific Aid Flow, Official Development Assistance and Income Disparity: An Analysis from Selected Asian Countries

Abstract

Over the decades, there has been much-observed income disparity in poor and developing countries. For this, donor countries provide aid for disbursement in some specific sectors to alleviate poverty and disparity. Considering the severe issue of income disparity in Asian economies, this research has focused on the role of sector-specific and foreign aid in lessening income disparity in these economies. We have used panel data from 10 selected Asian countries and found that aid for the education and health sectors. This research has utilized the data drawn from 10 selected Asian economies such as Bangladesh, India, Indonesia, Malaysia, Sri Lanka, Pakistan, Philippines, Iran, Jordan and China. The data has been considered from 2003 to 2018 due to data deficiency of important variables. The data has been taken from World Bank Development Indicators. The Gini coefficient income inequality) was considered a dependent variable. Education aid commitments (total number of commitments for education from donor countries), health aid commitments (total number of commitments for aid for the health sector from donor countries), official development assistance ($US million) and total population have been used as independent variables. The study used the fixed effect method to indicate an association of dependent and independent variables. Results of the study revealed that official development assistance has played a key role in lessening income disparity in these economies. Findings suggest its transparent allocation to both sectors for high growth, attracting more aid from the donor countries. There is a serious need for a stable political environment. Finally, measures should be taken to control the population in these countries.