Whom is economic aid meant for? The push vs. pull determinant factors of official development assistance

Abstract

This study investigates the determinants of official development assistance (ODA). We use a push-pull factor framework, which represents a donor and recipient country's business cycle characteristics such as gross domestic product (GDP) and interest rate. Time-variant and invariant country-pair characteristics are also taken into consideration for correct estimation. Our empirical results are as follows: i) push factors rather than pull factors have a greater influence on the total amount of ODA; ii) the main determinants of grants (a major component of ODA) are generally very similar to the determinants of ODA. In loan determinants, however, the number of significant push factors is smaller compared to ODA and grants; iii) both push and pull factors of tax revenue and push factors of the population are closely associated with the size of the ODA; and iv) the push factor of the quality of governance plays different roles depending on the group of donor countries. Our main empirical results are robust to alternative measures and model specifications.