Effect of ODA on the Donor's Economy: Localization and Technological Innovation Efforts of Recipient Country and the Sectoral Differentials of Effects

Abstract

Most research on Official Development Assistance (ODA) targeted the recipients, but this study examines the effect of ODA on the donor's exports to the recipient. To do this, a panel analysis was carried out with ODA and macroeconomic data on the United States and 33 other countries from 1999 to 2009. The results are summarized as follows: (1) The economic influence on the donor varies with the recipient's localization effort. (2) High-tech exports to the recipient are independent of ODA. (3) In medium-to-low-technology areas, ODA has a positive effect on exports to the recipient with low absorption efforts. (4) Both High-tech and LM-tech product exports decreases with the technological innovation efforts of recipients with high absorption efforts, while High-tech product exports only increases with that of recipients with low absorption efforts. These results indicate that a strategic approach for ODA program is more effective and useful to the donor's economy.

Innovation and Sustainable Development: Does Aid and Political Instability Impede Innovation?

“…The short-run and long-run results reported in Table 5 reveal that aid has adverse impacts on innovation in both the long run and the short run. Scholars argues that aid is like a policy and its outcomes depends on its implementation (Asongu & Nwachukwu, 2017), and aid acts as an obstacle if the NIS of the recipient country (e.g., Pakistan) is vulnerable to political and socioeconomic problems (Guillaumont & Chauvet, 2001;J. Kim et al, 2015;Radelet, 2006).…”

“…G. Hu & Jefferson, 2002;Johansson & Pettersson, 2009;Martinez-Zarzoso, 2019). In the same way, if the NIS of the recipient country is vulnerable to socioeconomic and political problems, aid may not contribute positively and can act as obstacles in certain cases (Guillaumont & Chauvet, 2001;J. Kim et al, 2015;Radelet, 2006).…”