The determinants of the geographical allocation of EC aid to the developing countries

Abstract

This paper examines the economic rationale of the EC's aid policy towards the LDCs. A multiple linear regression is conducted on the ECs flows of aid to 62 LDCs during the 1975–80 period, using two alternative models, one trying to explain the ECs pattern of geographical allocation of aid using variables that assess the needs of the recipients and another using variables that asseses the interests of the EC. The results show that the EC multilateral aid to the LDCs is more motivated by the needs of the recipients in terms of their current account balance of payments and their state of basic human needs as these are assessed by the physical Quality of Life Index(PQLI). An important consideration, however, is also given to Community export interests and to a tendency not to allocate aid to security-sensitive countries. It is also demonstrated that in the second half of the 1970s an emphasis persited on francophone LDCs. By comparison, bilateral aid distributed by the EC member states has been motivated to a greater extend by their export interests although balance-of-payments considerations continue to be important. The overall profile of Europeon aid allocation (EC multilateral and member states' bilateral)is more affected by the determinants of the latter, as the sums involved are much greater.