Foreign Aid Allocation Research Articles

Development NGOs, Domestic Politics, and Foreign Aid Allocations

Development NGOs, Domestic Politics, and Foreign Aid Allocations

Interest, Need, or Reputation? Determinants of Qatar's Foreign Aid

Abstract The literature on the motivations behind emerging donors’ foreign aid contributions—with the exception of larger countries such as China, India, Brazil and Turkey—lacks original data and empirical analyses. This article addresses this gap by providing a novel, detailed dataset of the foreign aid allocations of one resilient, relatively small emerging donor, Qatar, for the period from 2014 to 2021. The contents of our database, which we dub Qatar Aid Database, encapsulate the features of Qatar's international aid. To illustrate our dataset's efficacy, we investigate whether Qatar's foreign aid operations aim to satisfy donor interests, recipient needs, or something else. Our empirical findings affirm that although Qatar's aid allocation decisions prioritize recipient needs, its aid provision depends more on Qatar's foreign policy interests in the targeted countries.

Elusive collaboration? The determinants of lead donorship in international development

AbstractLead donorship is a condition of sustained outsized responsibility by one foreign aid donor country for giving aid to a developing country. Prior research argues that lead donorship can either be a product of donors collaborating to carve out spheres of influence to maximize non-development foreign policy goals or else of donors buck-passing responsibility for addressing recipient needs. Which is it? This study seeks to answer this question using theory-driven expectations about when and where lead donorship should arise if donors cooperate or systematically fail to do so. It further develops novel measures of foreign aid’s public goods characteristics and donors’ marginal returns from giving aid that should help triangulate conditions under which we can expect lead donorship to arise due to cooperation or else its absence. Estimates from a flexible semi-parametric modeling strategy show that when and where lead donorship has the highest probability of occurring is consistent with systematic cooperation failure in the allocation of foreign aid. Various robustness checks are done and alternative explanations are also discussed. These findings provide insight into ongoing policy debates about donor cooperation and aid effectiveness and raise questions about what deeper strategic logics preclude donor cooperation.

Right to Development and the Role of DAC OECD Foreign Aid to Development in Africa

When the concept of the human right to development was articulated in Africa in the late 1960s and early 1970s, the idea was not to ask for development aid but to assert the right to self-determination, or even the right to genuine liberation from continued external domination, in order to assume sovereign control and determine the continent’s own developmental destiny. However, in the course of evolution, the idea of the right to development has been distorted to some extent and has been thwarted in order to imply recourse for its realization. Developed countries were required to provide 0.7% of their annual gross domestic product as foreign aid to assist developing countries, including African countries, in their efforts to achieve comprehensive development. Over more than six decades, from 1960 to 2022, the Development Assistance Committee of the Organization for Economic Cooperation and Development (DAC OECD) donor countries provided a total of USD 1.23 trillion in development assistance to 48 recipient countries in Africa. This paper examines the extent to which the foreign aid allocations have contributed to development of recipient countries in Africa. The findings illustrate that despite the continued shipment of foreign aid to Africa, impoverishment and underdevelopment have worsened across the continent, raising the question of why Africa should remain trapped in the DAC OECD “dead aid” conundrum when alternative, mutually beneficial development cooperation mechanisms could be explored.

Foreign Aid Allocation and Regime Stability: A Cross-National Study in Indonesia

Purpose: The aim of the study was to analyze the foreign aid allocation and regime stability: a cross-national study in Indonesia. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: The study in Indonesia revealed that foreign aid allocation plays a crucial role in regime stability. Increased foreign aid, especially directed towards economic development and infrastructure, positively impacted regime stability. Conversely, political conditionality attached to aid often led to destabilization, fostering domestic opposition and unrest. Unique Contribution to Theory, Practice and Policy: Dependency theory, principal-agent theory & institutional theory may be used to anchor future studies on foreign aid allocation and regime stability: a cross-national study in Indonesia. By pooling resources, sharing expertise, and aligning objectives, stakeholders can leverage synergies and address governance challenges more effectively. Donor countries should adopt more coherent and principled aid allocation policies that prioritize the promotion of democratic governance, human rights protections, and inclusive development.

India's Strategic Foreign Aid: 'The China Factor' in India's Foreign Aid Allocation

Foreign aid is known to be the primary means through which governments assist each other. Beyond the altruistic incentives for such help, however, there is self-interest involved. Consequently, foreign aid is not always directed towards the states who need it the most, but rather to those, who can contribute to the donor’s strategic considerations. India is one of the emerging countries, which over the past three decades has been expanding its foreign aid in scale and scope. The rationale behind such foreign policy move by New Delhi is argued to be improving India’s international standing. Its biggest rival China, however, is rapidly expanding its own influence and is stepping into India’s strategic space. In this paper we argue that ongoing emerging power rivalry with China is a key determinant in New Delhi’s foreign aid allocation decisions. we analyse India’s foreign assistance for the period 2015-2020 and look for the ‘China factor’ in its allocation strategies. The cases of the Maldives and Mauritius provide evidence for the main argument and show India as a ‘reactive donor’.

When Does Security Cooperation Increase Foreign Aid Allocation?

While many scholars find that security cooperation increases the foreign aid that allies receive from a major power, other studies show that an alliance also has negative effect and its terms can change over time. This article argues that a donor’s security environment impacts its participation in security cooperation and, subsequently, foreign aid allocation to allies. When the security environment is competitive, a donor will concentrate its resources on strengthening its ties with allies. In contrast, when the environment is favorable to a donor, it can use security cooperation as leverage to obtain policy concessions from allies, thus reducing its own foreign aid expenditures. This paper analyzes the aid allocation of three major power donors as well as 72 formal defense pacts and 70 bilateral defense cooperation agreements, and it finds that a favorable security environment allows a donor to reduce its economic contribution to its allies by 19 percent.

Aid accessibility: Equity & education in Kenya

While we hope that the needs of recipients determine the allocation of foreign aid, we know that aid also involves the interests of donors. Substantial evidence suggests that supply-side factors dominate aid delivery, with both donor and recipient governments allocating aid according to their own domestic political agendas. Are there ever conditions under which need drives allocation and aid flows primarily to those that need it most? The distribution of education aid across regions in Kenya offers a most-likely case for such equitable, need-driven aid allocation. Kenya’s political stability and history of collaboration with aid organizations, paired with still high levels of need create favorable conditions for aid delivery to occur equitably. Yet, statistical analysis suggests that even there, the highest volume of aid does not flow to the neediest areas. This paper introduces new subnational data on aid location and maps the concentration of aid allocation in relation to the level of need across regions within Kenya. In the education sector, while most aid flows to high-need locations, aid is nearly absent in Somali-majority areas that have the highest levels of need but the fewest interventions. Such inequitable distribution of both education and assistance in its provision demonstrates how the political preferences of donors and recipient governments can divert aid away from the populations and places that need it most, reducing its effectiveness.

Donor motivation in the era of the COVID-19 crisis: Focusing on South Korean health diplomacy and response aid to COVID-19

COVID-19 has brought an unprecedented global economic burden. The widely held view is that, during times of economic crisis, there are reduced flows of foreign aid due to budgetary constraints. Although some countries’ actions seem aligned with this perspective, others, including South Korea, have acted counter-intuitively. South Korea has implemented health-related diplomacy, initiating the Agenda for Building Resilience against COVID-19 through the Development Cooperation (ABC) program. This program provides countries with COVID-19 diagnosis kits, personal protective equipment, such as masks, and health-related capacity for building and development projects. We attempt to understand the behavior of donors in the crisis context and, thus, examine South Korea as a representative case. Using South Korean health-related diplomacy as our case study, we show that South Korea has considered both its interests and recipients’ needs. Furthermore, a quantitative study with newly constructed data from the ABC program reveals that South Korea provides higher amounts of Official Development Assistance (ODA) via its ABC program to recipients with whom it enjoys close economic ties and with whom it has given higher amounts of ODA. The latter finding suggests a path-dependent act in foreign aid allocation.

Women Legislators in Africa and Foreign Aid

Abstract There has been a significant rise in the share of women legislators in Africa. What makes this fact puzzling is that it cannot be attributed to an African electorate that values gender equality and having women in political leadership positions. In stark contrast to this, gender equality and women’s empowerment have successively moved up in the priority list of the international donor community over the last two decades. This raises the question of whether there is a relationship between women legislators in Africa and foreign-aid allocations. This study finds a strong and statistically robust relationship: an increase in the share of women legislators from 15 to 20 percent is associated with an increase of about 4 percent in aid conditional on current levels of aid. Additionally, the study finds that democratic countries receive more aid but does not find an interaction effect between democracy and the share of women legislators, which suggests that donors do not tailor their gender-selective aid towards more democratic countries. The results provide evidence in support of aid selectivity for policies that improve gender equality in aid-recipient countries in Sub-Saharan Africa.

International climate aid and trade

Foreign aid allocation by donor countries to developing economies is known to be motivated by the donor country’s bilateral trade interests. Does this apply also to bilateral climate aid? In this paper, we combine theoretical and empirical analyses to investigate how bilateral trade affects donor countries’ allocations of bilateral climate aid. Our theoretical analysis develops a simple model to support our hypothesis that bilateral trade has a positive impact on climate aid transfers. The model highlights the terms-of-trade and positive income effects of climate aid, and predicts a positive relationship between donor countries’ exports to and imports from recipient countries and their climate aid transfers. The empirical analysis is based on bilateral climate aid data for 2002 to 2017. We employ fixed effects and instrumental variable-2 stage least square estimations (IV-2SLS) with a shift-share instrument to overcome the endogeneity of trade. Our empirical results show that donors’ exports have a significant, robust, positive effect on climate aid transfers.

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.

Effect of sectoral foreign aid allocation on growth and structural transformation in sub-Saharan Africa—Analysing the roles of institutional quality and human capital

The study analyses the effectiveness of aggregate as well as sectoral foreign aid on growth and structural transformation for 32 sub-Saharan African (SSA) countries over the period from 2002 to 2019. For this purpose, a structural transformation index (STI) has been constructed using the value-added and employment shares of the economy. There is a lack of studies in the aid effectiveness literature that examine the effects of sectoral aid on overall growth and development of the economy. Comparing the effectiveness of different types of aid on growth and structural transformation is a novel approach. In this analysis, we also take into account the roles of institutional quality and human capital on aid effectiveness. To this end, we have used Driscoll–Kraay Fixed-Effect estimators, Fixed-Effects Panel Threshold regression and Method of Moments Quantile regression to analyse the effectiveness of aggregate and sectoral foreign aid. Our estimation techniques are robust to cross-sectional dependence and slope heterogeneity. We find that both agricultural and social-sector aid have positive significant effects on growth but negative significant effect on structural transformation. This suggests that foreign aid should be increased in these sectors, conditioned by the level of institutional quality. Human capital is found to increase the effectiveness of foreign aid. Aid to economic infrastructure is the only type of aid which is found to increase structural transformation significantly. This study helps in designing aid allocation strategies, so as to promote both growth and structural transformation in the SSA countries.

Who Gets the Goodies? Overlapping Interests and the Geography of Aid for Trade Allocation in Bangladesh

The Sustainable Development Goal principle of “leaving no one behind” has led to increased attention being paid to patterns of intra-country allocation of foreign aid. We contribute to these efforts by considering a particular type of foreign aid, Aid for Trade (AfT), to discern allocation objectives of aid. We match a novel, geo-coded, dataset on over 11,000 Bangladeshi exporting firms to over one thousand AfT project locations in Bangladesh similarly geo-coded by AidData and expanded by ourselves. We use this matched data to employ spatial techniques that evaluate political economy logics of aid allocation, wherein AfT is functionally targeted towards exporting firms, is allocated based on prebendalism, and/or is directed to high poverty areas. Our analysis finds support that AfT is allocated based on functional or prebendalist logics. The results for poverty are more nuanced. When considered in a stand-alone fashion, poverty is associated with a smaller likelihood of allocation. However, some evidence suggests that when the other logics are present, the impact of poverty on allocation becomes positive. These findings suggest that the politics of aid allocation is a nuanced and intricate dance with multiple overlapping or competing logics.

Political Leaders, Economic Hardship, and Foreign Aid Allocation

AbstractWhile political leaders’ role in foreign policy choices has received increasing scholarly attention, surprisingly less is known about how they affect the allocation and distribution of official development aid. This study examines how the material background of political leaders influences their aid allocation strategies in donor countries. We contend that leaders with economic hardship experience distribute more foreign aid than those without such experience. Through socialization, leaders with economic hardship experience become more supportive of public good provisions that address problems related to poverty and inequality. Resultantly, they exhibit more favorable attitudes toward development assistance programs targeting developing countries. We find that political leaders who experienced economic difficulty in their youth are likely to provide more foreign aid, especially social and economic infrastructure aid, than leaders without such experience. By introducing the political leaders’ role, this study contributes to the literature on the interaction between domestic politics and foreign aid.

Buying influence? Rotating leadership in ASEAN and allocation of Chinese foreign aid

Abstract China has expanded its economic footprint in Southeast Asian countries by providing a growing amount of development finance to the region. We examine the allocation of Chinese foreign aid toward Southeast Asian countries exploiting the exogenous variation of rotating leadership within Association of Southeast Asian Nation (ASEAN). As the ASEAN Chair possesses the agenda-setting power and represents the organization, China strategically allocates more development aid to the ASEAN Chair to augment its influence in the region. Our analysis of Chinese aid allocation between 2000 and 2017 finds that taking the leadership position at ASEAN appears to be significantly associated with an increase of official development aid flows from China, while other commercial flows are only weakly associated with the leadership position. Our findings underscore the importance of considering the regional context in examining foreign aid allocation and show that a donor can target a regional organization to exert its political influence in the region.

Evaluating explanations for poverty selectivity in foreign aid

AbstractEnding global poverty has been at the forefront of the development agenda since the 1970s, but many donors have failed to target their funds toward this goal. Activists have tackled this issue by appealing to donors’ humanitarian motives, but we know little about what explains donors’ decisions on how much to give to the poorest countries. This paper develops the donor motivation and foreign policy approaches and identify donors’ development motives and their budget sizes as potential determinants of poverty selectivity. We evaluate their explanatory power by assessing whether their relationships with selectivity are in the hypothesized directions and generalize beyond a particular dataset. Employing cross‐validation and Bayesian Model Averaging, we find few measures of donor motivations provide a generalizable and hypothesized explanation for poverty selectivity. In contrast, donor budget sizes exhibit a relationship that is both hypothesized and externally valid. Our study offers the first systematic analysis of aid selectivity and generates implications for recent approaches to improve the quality of foreign aid and the conventional approach to study foreign aid allocation and donor motives.

Donor aid allocation and accounting standards of recipients

How do donor countries determine foreign aid allocation? The literature seems to agree that institutional quality could be a possible determinant. However, no study has found any decisive variable to represent this factor. Recently, an increasing number of countries, developed as well as developing, have been adopting International Financial Reporting Standards (IFRS) as a single set of high-quality global accounting standards. IFRS aims to generate accurate financial information and to remove information asymmetry, thereby potentially improving corporate governance and performance in firms. We hypothesize that donors allocate more aid to mandatory IFRS-adopting recipients than nonadopting ones, expecting higher aid effectiveness in the recipients. Our bilateral panel data analysis on commitment flows between 28 Development Assistance Committee (DAC) donors and more than 90 recipients shows that, upon mandatory IFRS adoption by a recipient, donors increase the amount of aid by approximately 20%.

New Donors, New Goals? Altruism, Self-Interest, and Domestic Political Support in Development Cooperation in Latin America

ABSTRACTThe literature on aid allocation shows that many factors influence donors’ decision to provide aid. However, our knowledge about foreign aid allocation is based on traditional foreign aid, from developed to developing countries, and many assumptions of these theories do not hold when applied to southern donors. This article argues that south-south development cooperation (SSDC) can be explained by the strength of development cooperation’s domestic allies and foes. Specifically, it identifies civil society organizations as allies of SSDC and nationalist groups as opponents of SSDC. By using for the first time data on SSDC activities in Latin America, this article shows the predictive strength of a liberal domestic politics approach in comparison to the predictive power of alternative explanations. The results speak to scholars of both traditional foreign aid and south-south development cooperation in highlighting the limits of traditional theories of foreign aid motivations.

محددات تخصیص المساعدات العربیة للدول الأفریقیة: استخدام أسلوب تحلیل الانحدار خلال الفترة 2013-2018

على الرغم من وجود کثير من الدراسات التي قامت بتحليل محددات تخصيص المساعدات الأجنبية- سواء من قبل دول منظمة التعاون الاقتصادي والتنمية أو بعض الوکالات التابعة للأمم المتحدة- إلا أنه يندر وجود دراسات قدمت تحليلا منهجيا لتخصيص المساعدات الأجنبية بشکل عام والعربية بشکل خاص. وما هو موجود من الأدبيات لا يجيب عن التساؤل الخاص بالعوامل التي تؤثر في توزيع هذه المساعدات على الدول المتلقية. وتهدف هذه الورقة إلى التعرف على محددات تخصيص المساعدات العربية للدول الأفريقية من خلال تحليل الانحدار باستخدام طريقة المربعات الصغرى لأربع جهات مانحة عربية وباستخدام Panel Data خلال الفترة من 2013 وحتى 2018، وباستخدام صافي المساعدات الإنمائية الرسمية کمتغير تابع، ومجموعة من المتغيرات المستقلة التي تشمل متغيرات تعکس خصائص وحاجة الدول الأفريقية المتلقية للمساعدات، ومتغيرات تعکس مصلحة الجهات المانحة العربية. وقد توصلت الورقة إلى أن محددات تخصيص المساعدات العربية وإن کانت في مجملها تتأثر بمصلحة الجهات المانحة العربية أکثر من حاجة الدول المتلقية، إلا أنها تختلف من جهة مانحة إلى أخرى. فقد أظهرت نتائج تحليل الانحدار أن المصلحة الاقتصادية، والتحيز العربي، وعلاقة الدول المتلقية مع إسرائيل محددات رئيسية في تخصيص مساعدات الإمارات وصندوق الأوبک للتنمية الاقتصادية، کما اتضح أن عدد سکان الدولة المتلقية يعد محددا رئيسيا في تخصيص المساعدات الکويتية. أظهرت النتائج أيضا أن هناک تحيزا عربيا في تخصيص المساعدات السعودية، وأما عن الخصائص المؤسسية للدول المتلقية فقد اتضح أن مستوى الشفافية الذي تتمتع به الدولة المتلقية محدد رئيسي لتخصيص مساعدات صندوق الأوبک للتنمية الاقتصادية. Although there are many studies that have analyzed the determinants of the allocation of foreign aid, whether by the OECD countries or some agencies of the United Nations, there are few studies that have provided a systematic analysis of the allocation of foreign aid in general and Arab aid in particular. What is available from the literature does not answer the question about the factors that affect the distribution of this aid to the recipient countries. This paper aims to identify the determinants of allocating Arab aid to African countries through regression analysis using the least squares method for four Arab donors and using Panel Data during the period from 2013 to 2018, using net official development aid as a dependent variable, and a set of independent variables that include variables that reflect Characteristics and needs of African countries receiving aid, and variables that reflect the interest of Arab donors. The paper concluded that the determinants of the allocation of Arab aid, although in its entirety, are affected by the interests of Arab donors more than the needs of the recipient countries, but they differ from one donor to another. The results of the regression analysis showed that the economic interest, the Arab bias, and the relationship of the recipient countries with Israel are major determinants of the allocation of the UAE aid and the OPEC Fund for Economic Development, and it became clear that the population of the recipient country is a major determinant in the allocation of Kuwaiti aid. The results also showed that there is an Arab bias in the allocation of Saudi aid, and as for the institutional characteristics of the recipient countries, it became clear that the level of transparency enjoyed by the recipient country is a major determinant of allocating the OPEC Fund for Economic Development aid.