Allocation Of Official Development Assistance Research Articles

The targeting of ODA by Central and Eastern European EU donors

ABSTRACT The study analyses the allocation of Official Development Assistance (ODA) by those Central and Eastern European (CEE) donors that are also members of the EU. Using both absolute and relative data from the OECD and UNDP databases for each recipient country, we have established a general trend in CEE EU countries aid provision and identified cases of exceptional donor engagement. The main axis of the study is the analysis of the ODA/HDI ratio, focusing on flows in 2021 and then on 2013–2021 to establish the long-term trend. The result is a positive correlation between the volume of aid provided and the HDI score in each of the perspectives considered. This leads to a surprising trend of increasing aid activity by CEE EU donors as the level of development of the recipient countries improves. The results of the data analysis and the conclusions drawn from the literature suggest that the distribution of CEE EU ODA is much closer to a donor interest model. However, it is possible that this trend may gradually evolve towards a hybrid model, given the surge in ODA spending following the outbreak of the Russia-Ukraine war and increasing external pressure.

Spatial Econometric Analysis of Korea’s Official Development Assistance Allocation Using Error Corrected Spatial Lag and Spatial Error Models

Spatial Econometric Analysis of Korea’s Official Development Assistance Allocation Using Error Corrected Spatial Lag and Spatial Error Models

Insights from the COVID-19 pandemic: trends in development assistance committee countries’ aid allocation, 2011–2021

ABSTRACT Background Official Development Assistance (ODA) significantly aids sustainable development in low- and middle-income countries (LMICs). However, the COVID-19 pandemic has impacted aid allocation, posing challenges for attaining the Sustainable Development Goals (SDGs). Objective This study explores and underscores the profound implications of shifts in ODA allocation by Development Assistance Committee (DAC) member countries, resulting from the COVID-19 pandemic, offering a unique perspective on the evolving landscape of international aid. Methods Drawing from the gross ODA disbursement data for LMICs by DAC member countries from 2011 to 2021, a linear regression analysis assessed the changes in ODA amount, ODA-to-gross national income (GNI) ratio, sectoral aid allocation, and the balance between bilateral and multilateral aid, primarily focusing on the differences pre- and post-COVID-19. For non-specialised multilateral agencies’ core funding, the OECD’s methodology for calculating imputed multilateral ODA was employed to estimate ODA flows. Results The study found an increasing trend in the total ODA provided by DAC member countries from 2011 to 2021. However, the average ODA/GNI ratio showed a slight but significant decrease before the pandemic, followed by an increase after the COVID-19 pandemic. The health sector received the highest percentage of aid after the pandemic, with a marked increase in both bilateral and multilateral aid. However, other sectors such as humanitarian aid, water and sanitation, and energy experienced a significant decrease in sectoral aid share. Conclusions Emerging from this analysis is a strong recommendation for DAC members to re-evaluate aid objectives and escalate their financial commitments to reinforce SDGs and sustainable development efforts. While the rise in health aid is essential, other sectors also require equal focus to offset the ramifications of the COVID-19 pandemic. Understanding the intricacies of aid allocation can improve aid efficacy, culminating in greater, transformative results for recipient countries.

중국 원조의 결정요인 분석

The purpose of this study is to examine what factors China’s foreign aid allocation affected based on the case of Mozambique. Dreher et al.(2018), the most pioneering research on Chinese aid argue that China’s foreign policy interests determine its allocation of Official Development Assistance(ODA) flows and that economic considerations determine less concessional forms of official financing(Other Official Flows, OOF). However, existing studies examining the factors of aid allocation in Western donor countries show a mixture of factors such as donors’ interest and recipients’ development. This study argues that through the Mozambique case, China’s aid is also allocated by the interaction of various factors. Utilizing the Granger Causality test, we find that while ODA flows affect exports from China to Mozambique, exports do not cause ODA. In terms of OOF, the argument of Dreher et al.(2018) was not supported. OOF is not distributed according to economic purpose. Investigating aid to the agriculture, social infrastructure, health, and education sectors, this study shows that aid is distributed for different purposes depending the sector.

An Ode to ODA against all Odds? A Novel Game-Theoretical and Empirical Reappraisal of the Terrorism-Aid Nexus

The present inquiry revisits the influence of the fourth religious wave of modern terrorism on the allocation of official development assistance (ODA). The theoretical framework is predicated first on comprehensive review of the pertinent literature on the nexus between political instability and foreign aid, augmented by the assessment of Central Intelligence Agency declassified documents and Congressional Service Reports. Based on the systematic review of the sources, the study puts forward a novel dynamic differential game theory model, which enables derivation of the scenarios for foreign aid allocation. The study finds that despite dominance of geopolitical and/or commercial interests in the allocation of aid, high incidence of terrorist attacks does not lead to less development aid, but rather catalyzes it. Subsequent empirical analysis of a dataset with 121 developing and transition economies spanning between 1970 and 2016 reveals that terrorism incidents, level of political rights, and the War on Terror had a statistically significant positive long-run and negative short-run effect on the level of foreign aid commitment of the Organisation for Economic Co-Operation and Development member states. The growth rate of foreign aid in the developing countries with a predominantly Muslim population has been systematically 0.1 to 0.85 percent greater than in non-Muslim countries. Subsequent assessment of the security bias in the allocation of aid indicates that re-securitization of aid since 1998 has led to weak diversion of aid commitment from areas with fewer terrorism incidents to jurisdictions with a greater frequency of terrorist attacks.

Identifying differences and similarities between donors regarding the long-term allocation of official development assistance

ABSTRACT Advanced countries have pledged to mobilize additional financial resources to developing countries, including funding from multiple sources other than official development assistance (ODA), known as foreign aid. However, the effect of the novel coronavirus pandemic has raised doubts about the feasibility of such a pledge, highlighting, once again, the possible role of ODA and the importance of explaining its allocation, which could be of vital relevance for understanding its effectiveness. This study analyzes a vast number of bilateral and multilateral donors by applying a novel methodology in the context of aid allocation – principal-component factor analysis – covering the period 1990–2015. The results revealed four distinct clusters of donors: (i) the proportionally largest Western European donors, characterized by a significant number of beneficiaries, especially low-income countries; (ii) donors that are predominantly driven by structural links with recipients, especially links derived from colonial connections; (iii) a group of mainly Eastern European donors who are engaged with lower-income countries in Eastern Europe and Western Asia; and (iv) a group of Asian and Oceanian donors that select their partners mainly based on the geographical proximity criterion.

Tracking sectoral allocation of official development assistance: a comparative study of the 29 Development Assistance Committee countries, 2011–2018

ABSTRACT Background: Official development assistance (ODA) is one of the most important means for donor countries to foster diplomatic relations with low- and middle-income countries and contribute to the welfare of the international community. Objective: This study estimated the sectoral allocation of gross disbursements of ODA of the 29 Development Assistance Committee (DAC) member countries of the Organisation for Economic Co-operation and Development (OECD) for the duration of 2011 to 2018, by aid type (bilateral, multilateral, and both aids). Methods: Data from the OECD iLibrary were used. The sector definition was based on the OECD sector classification. For core funding to multilateral agencies that do not specialize in each aid sector, we estimated ODA and its flows based on the OECD methodology for calculating imputed multilateral ODA. Results: For all 29 countries, during the period of 2014–2018 where data were available for all the countries, the sector with the highest average annual ODA contribution was health at 20.34 billion USD (13.21%), followed by humanitarian aid at 18.04 billion (11.72%). Humanitarian aid has increased in the sectoral share rankings in both bilateral and multilateral aid, and the sectoral share for refugees in donor countries has increased in bilateral aid. While the 29 countries show relatively similar trends for sectoral shares, some countries and sectors display unique trends. For instance, infrastructure and energy sectors in bilateral aid of Japan are particularly high accounts for 48.48% of the total bilateral ODA of the country in 2018. Conclusions: This paper evaluated ODA trends by major donors of DAC countries in the pre-COVID-19 pandemic periods. We hope that our estimates will contribute to the review of the strategic decision-making and the effective implementation of future ODA policy discussions in the DAC countries while ensuring transparency.

Determination Crisis: Media Effect Applies to Which Type of Aid? Development Aid, Humanitarian Assistance, or Food Aid.

This paper adds to the growing body of knowledge in media and foreign aid. We aim to determine whether the impact of media-led US aid allocation applies universally to any foreign aid or specific to certain aid types. This paper's contribution is that we created three new media variables and use them to determine the strength of media effect on US Official Development Assistance (ODA), humanitarian assistance, and food aid. We generated the media variables from citations of an aid recipient's events in the four leading US daily newspapers' (the New York Times, the Wall Street Journal, the Washington Post, and the Los Angeles Times) from 1966 to 2014. We used panel data fixed effects estimation technique on a dataset comprising 134 countries to determine the net strength of aid's media effect. Our findings showed that media's impact is ambiguous on the allocation of ODA. We found that the US ODA disbursement is unresponsive to media effect, whereas ODA commitment varies depending on the comparison's context. Media exposure is a critical factor for US humanitarian assistance and food aid disbursements.

Development aid and its impact on poverty reduction in developing countries

PurposeThis paper aims to assess whether official development assistance (ODA) or foreign aid has been effective in reducing extreme poverty; test whether the type and source of aid matter; and examine whether political or economic freedom enhances aid effectiveness in developing countries.Design/methodology/approachThe study uses recent dynamic panel estimation techniques (system generalised method of moments), including those methods which deal with endogeneity by controlling for simultaneity and unobserved heterogeneity.FindingsThe main findings of the study are: firstly, foreign aid does have a statistically significant poverty reduction effect and the results are consistent across all the three extreme poverty proxies. Secondly, the disaggregation of aid by source and type shows that total aid, grant and bilateral aid are more likely to reduce poverty. Thirdly, political freedom might not be an effective channel through which aid impacts extreme poverty, but aid is more effective in an environment where there is respect for freedom of enterprise.Research limitations/implicationsAs with most cross-country aid–growth–poverty dynamic panel data studies, the challenges of establishing robust causality and accounting for the unobserved country-specific heterogeneity remain apparent. However, given the data availability constraints, generalised method of moments is, to the best of the authors’ knowledge, the most robust empirical strategy when T < N. Future research could explore possibilities of individual country analysis, disaggregating countries by income and also examining the direction of causality between foreign aid, poverty and democracy.Practical implicationsThe policy implications are that the development partners should continue to focus on poverty reduction as the main objective for ODA; aid allocation should be focused on channels which have more poverty-reduction effect, such as per capita income and economic freedom; and aid recipient countries should also focus on reducing inequality.Social implicationsThe main social implications from this study is that it is possible to reduce poverty through ODA. Second, to enhance the effectiveness of foreign aid, ODA allocation should be focussed on channels, which have more poverty-reduction effect, and the host countries should have economic freedom.Originality/valueThis paper makes a further contribution to the aid effectiveness literature, especially the channels through which foreign aid affects poverty.

What can we learn on Chinese aid allocation motivations from available data? A sectorial analysis of Chinese aid to African countries

Since the creation of the Forum on China-Africa Cooperation (FOCAC) in 2000, Chinese official development assistance (ODA) to Africa has increased drastically. Only few analyses on the determinants of Chinese ODA allocation to African countries are available. Moreover, existing literature mainly focused on total aid flows while Chinese motivations for aid allocation might differ depending on the ODA sector considered. Our objective is to study the factors associated with Chinese aid allocation to African countries by sector between 2000 and 2014. We consider three ODA broad sectors as defined by the Organisation for Economic Cooperation and Development (OECD): the social infrastructure and services sector, the economic infrastructure and services sector and the production sector. Chinese ODA is measured using AidData's Global Chinese Official Finance Dataset, 2000–2014, Version 1.0. Over the 2000–2014 period, China allocated 971, 218 and 138 ODA projects to African countries in the social infrastructure and services sector, the economic infrastructure and services sector and the production sector respectively. Between 2000 and 2014, the economic infrastructure and services sector was the first sector in terms of ODA amount with a total of US$18.9 billion ahead from the social infrastructure and services sector with US$7 billion or the production sector with US$3.1 billion. Results of our analysis suggest that the motivations of Chinese aid allocation to African countries differ by sector. Chinese ODA in the social infrastructure and services sector appears more responsive to the economic needs of recipient countries but is also more driven by foreign policy considerations. Chinese economic interest, in particular for natural resources acquisition, is associated with China's ODA allocation in the economic infrastructure and services sector. Finally, while governance quality in recipient countries is not related to Chinese ODA in the social infrastructure and services sector, we find that China allocates more ODA in the economic infrastructure and services sector and the production sector to African countries with weaker institutions. One of the strong conclusions of this study is to show that considering only China's overall aid to Africa can be misleading as to its underlying determinants, and therefore to point out the need to disaggregate the analysis by ODA sectors.

Does Health Aid Reduce Infant and Child Mortality from Diarrhoea in Sub-Saharan Africa?

abstract Achieving sustained improvements in health outcomes remains a challenge for sub-Saharan Africa, where diarrhoea remains a leading cause of death in children under the age of five. This paper examines the impact of foreign aid to the health sector on diarrhoea mortality in children under five in 47 sub-Saharan African countries, using panel data on the sectoral allocation of official development assistance in conjunction with country-level data on health outcomes. After controlling for fixed effects and the potential endogeneity of health aid, we find that increased health aid and increased public health expenditure are associated with lower diarrhoea mortality in children under five. In addition, health aid increases government spending on health, suggesting that the overall impact of health aid on diarrheal death rates could exceed the direct effect. Furthermore, increased access to improved sources of water and sanitation are important in reducing child mortality from diarrhoea.

Apples and Dragon Fruits: The Determinants of Aid and Other Forms of State Financing from China to Africa

Chinese “aid” is a lightning rod for criticism. Policymakers, journalists, and public intellectuals claim that Beijing is using its largesse to cement alliances with political leaders, secure access to natural resources, and create exclusive commercial opportunities for Chinese firms—all at the expense of citizens living in developing countries. We argue that much of the controversy about Chinese “aid” stems from a failure to distinguish between China’s Official Development Assistance (ODA) and more commercially-oriented sources and types of state financing. Using a new database on China’s official financing commitments to Africa from 2000-2013, we find the allocation of Chinese ODA to be driven primarily by foreign policy considerations, while economic interests better explain the distribution of less concessional flows. These results highlight the need for better measures of an increasingly diverse set of non-Western financial activities.

Apples and Dragon Fruits: The Determinants of Aid and Other Forms of State Financing from China to Africa

Chinese “aid” is a lightning rod for criticism. Policymakers, journalists, and public intellectuals claim that Beijing is using its largesse to cement alliances with political leaders, secure access to natural resources, and create exclusive commercial opportunities for Chinese firms—all at the expense of citizens living in developing countries. We argue that much of the controversy about Chinese “aid” stems from a failure to distinguish between China’s Official Development Assistance (ODA) and more commercially-oriented sources and types of state financing. Using a new database on China’s official financing commitments to Africa from 2000-2013, we find the allocation of Chinese ODA to be driven primarily by foreign policy considerations, while economic interests better explain the distribution of less concessional flows. These results highlight the need for better measures of an increasingly diverse set of non-Western financial activities.

Is Aid for Agriculture Effective in Sub-Saharan Africa?

One of the key economic development challenges facing Sub-Saharan Africa (SSA) is its low agricultural productivity. Governments, donors, and foreign investors have underinvested in African agriculture even though research evidence shows that higher agricultural productivity would boost economic growth and poverty reduction. Solutions to the problem require a number of interconnected strategies, including, but not limited to, research on seeds and inputs, extension services, rural development, credit, institutional, and trade and price stabilization policies. We use the system two-step Generalized Method of Moments to examine whether official development assistance (ODA) for agriculture and rural development is helping to boost agricultural productivity. We find a positive relationship between ODA and agricultural productivity. However, when broken down into the main agricultural ODA recipient sectors, there is a substitution effect between food crop production and industrial crop production. While there exists a positive relationship between ODA for industrial and export crops output per worker (agricultural productivity), ODA for food crops has a negative relationship. Better public institutions and economic freedom are also found to enable agricultural productivity growth and to increase the ODA effectiveness. We correct the results for spurious correlation assuming that more ODA might be allocated where agricultural productivity is already increasing due to some other factors. Concerning the determinants of ODA allocation, we find that the allocation of ODA for agriculture is primarily determined by agricultural need, and that the expected effectiveness increases the ODA receipts. Finally, there is a weak ODA-led structural economic change effect in SSA. Labor released from agriculture to the urban sector(s) has a positive market effect on agriculture but is not engendering significant structural economic transformation.

Does Official Development Assistance Affect Donor's Export? Case of Korea

This paper aims to estimate the impact of bilateral Official Development Assistance (ODA) provided by Korea on its bilateral export to recipient countries. The empirical analysis is based on data from 1996 to 2014 with 121 recipient countries. Although the two models of determinants of ODA and its export effectiveness are highly interrelated, this kind of simultaneous model specification with two-ways causal relationship has not been conducted in the past. Employing a three-stage least squares estimation method leads to accounting for two-ways causal relationships between ODA and export while the endogeneity and sample selection bias are accounted for. Through using the gravity model in analysis of Korea's aggregated export data, the positive effect of bilateral ODA is confirmed when fixed unobserved effects are controlled. The model is further generalized by disaggregation of ODA into its underlying types. The results show that, humanitarian aid and loan-type aid turn out to be effective types of ODA to influence export positively. In terms of Korea's ODA allocation, the finding suggests that there is a two-stage decision making process in aid provision. In the first stage, a humanitarian purpose of aid dominates responding to lower income and disaster experienced countries' needs, even when lower bilateral trade prevails. The second stage is to make a decision regarding the size of ODA to selected recipient countries, and this presents a mixed purposes of giving ODA aiming at higher importer countries.

Comparing South Korea and Germany’s official development assistance projects in climate protection in Cambodia, Lao PDR, Myanmar and Vietnam

Purpose This explorative study aims to compare and analyze the behavior of a traditional and an emerging donor, namely, Germany and South Korea, in the field of climate change-related official development assistance (ODA). It analyzes their ODA projects in 2013 in four Southeast Asian countries severely affected by climate change, namely, Cambodia, Laos, Myanmar and Vietnam. It also adapts the existing framework to categorize ODA allocation according to receiving countries’ need and merit and donors’ self-interest. Design/methodology/approach The paper first describes both countries’ policies and activities. It then uses a country’s vulnerability to climate change as a measure of its need, its climate change readiness as a measure of its merit and its bilateral trade volume in environmental goods with donor countries as a measure of donors’ self-interest to analyze the allocation of climate-related ODA. Findings Results suggest that Korean ODA in the field of climate protection is driven more by receiving countries’ need and merit, but self-interest seems to be important for both donors. In addition, many projects labeled as adaptation or mitigation projects only have a weak link to these goals. There are limitations to the present paper. First, it could only analyze projects in 2013 because there are no earlier project data available in the Organization for Economic Cooperation and Development’s Creditor Reporting System. Second, because of the simplifying assumptions of the need–merit–self-interest framework, possible other determinants of aid allocation were deliberately ignored. Finally, this explorative study is restricted to four vulnerable countries in Southeast Asia. Originality/value To the best of the authors’ knowledge, this is the first paper to compare a traditional and an emerging donor’s behavior and to explore the allocation of climate-related ODA using the need–merit–self-interest framework.

Development aid: Regulatory Impact Assessment and conditionality

The purpose of this paper is to examine how Regulatory Impact Assessment (RIA) can contribute to decision-making processes of Official Development Assistance (ODA) loans and grants. The point of departure for the discussion is the phenomenon that RIA, within a context of ODA, is applied by International Finance Institutions mainly in the context of Development Policy Loans, to introduce or strengthen country systems for Regulatory Impact Assessment. However, ODA grants, and loans, particularly when specific policy or regulatory conditions are attached to them, significantly impact economic and social conditions within the beneficiary country. This article examines what role RIA can play in facilitating a coherent decision-making process affecting the ODA allocation within a context of conditionalities requiring the introduction of new, or changes to existing, policies and regulations. The discussion considers the nexus between development aid effectiveness, conditionality and ownership, and RIA. The article argues a justification for applying RIA to ODA loans and grants which carry regulatory and policy conditionalities.

Apples and Dragon Fruits: The Determinants of Aid and Other Forms of State Financing from China to Africa

Chinese “aid” is a lightning rod for criticism. Policymakers, journalists, and public intellectuals claim that Beijing is using its largesse to cement alliances with political leaders, secure access to natural resources, and create exclusive commercial opportunities for Chinese firms—all at the expense of citizens living in developing countries. We argue that much of the controversy about Chinese “aid” stems from a failure to distinguish between China’s Official Development Assistance (ODA) and more commercially-oriented sources and types of state financing. Using a new database on China’s official financing commitments to Africa from 2000-2013, we find the allocation of Chinese ODA to be driven primarily by foreign policy considerations, while economic interests better explain the distribution of less concessional flows. These results highlight the need for better measures of an increasingly diverse set of non-Western financial activities.

Reshaping geographical allocation of aid: the role of immigration in Spanish Official Development Assistance

The intensification of the international migration flows sent by developing countries and received by developed countries is ‘reshaping’ the aid map of the 21st century. However, to date the influence of immigration on the geographical distribution of aid has been little studied. This paper proposes a general framework for analysing the extent to which immigration flows affect the allocation of Official Development Assistance (ODA). We apply this model to the case of Spain (a country that, in a short time, became one of the top-ten bilateral donors and one of the main recipients of immigration in Europe) during the period from 1998 to 2009 (prior to the current economic crisis, which has slowed down the immigration flows temporarily and reduced the ODA budget drastically). The estimations reveal that immigration is relevant both to the selection of aid partners, and to the allocation of aid quotas, thus ‘reshaping’ the geographical strategy of Spain’s public aid.

Development assistance for neglected tropical diseases: progress since 2009.

Neglected tropical diseases (NTDs) is an umbrella term for a diverse group of debilitating infections that represent the most common afflictions for 2.7 billion people living on less than US$2 per day. Major efforts have recently re-focused attention on NTDs, including structured advocacy by the Bill and Melinda Gates Foundation, technical and political support by WHO and large-scale drug donation programs by pharmaceutical companies. An analysis of the Official Development Assistance (ODA) for NTDs in 2009 showed that Development Assistance Committee members and multilateral donors had largely ignored funding NTD control projects. This study reviews the changes since 2009 and finds an increased engagement by pharmaceutical manufacturers through drug donation programs substantially increased by the 'London Declaration' in 2012, a focused effort of 77 public and private partners on control or elimination of the 10 most common NTDs, but no increase in ODA for NTDs between 2008 and 2012. The allocation of ODA still does not reflect the respective importance of these diseases.