Evidence on Changes in Aid Allocation Criteria

Abstract

Have donors changed their aid-allocation criteria over the past three decades toward greater selectivity, a frequently stated goal of the international development community? Using data on how 22 donors allocated their bilateral aid among 147 countries over 1970-2004, the article finds that after the fall of the Berlin wall in 1989 and especially in the late 1990s, bilateral aid responded more to poverty and the quality of the policy and institutional environment in the recipient countries. Furthermore, the sensitivity of aid allocation to the country's size and its debt burden has declined over time. These results are robust to different samples and model specifications, various econometric techniques, and alternative measures of institutional quality. While the specific factors causing these changes cannot be identified-these presumably include geopolitical and economic concerns and the many changes in the international aid architecture-donors still differ greatly in their selectivity. This suggests that further, multifaceted reforms are needed to ensure even greater selectivity of aid. JEL codes: O11, O16, O19This article explores how country characteristics affect the way aid is provided by donor countries and how this has varied over time. Data on bilateral aid flows are relatively easily available for long periods of time for a large number of donors and recipient countries, allowing a combination of longitudinal and

Public Information and Performance: The Role of Spatial Dependence in the Worldwide Governance Indicators among African Countries

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Multiple equilibria in the dynamics of financial globalization: The role of institutions

“…In addition, as total liabilities include aid, we need to control for this too, as these are often substantial amounts for developing countries. We therefore included net aid transfers, taken from Claessens et al (2009). Furthermore, we experimented with data on stock market capitalization, but the data had too many missings to be useful.…”

Can foreign aid donors credibly threaten to suspend aid? Evidence from a cross-national survey of donor officials

“…4 There is some evidence that select donors reward democratic and democratizing states with higher volumes of aid at different periods of time (Bermeo 2011;457 SWEDLUND: ARE AID SUSPENSION THREATS CREDIBLE? Claessens, Cassimon, and Van Campenhout 2009;Dunning 2004;Freytag and Pehnelt 2009;Hout 2007;Reinsberg 2015), and several scholars find that donors are more willing to condition certain types of aid -namely aid given directly to the recipient government -on governance performance (Clist, Isopi, and Morrissey 2012;Dietrich 2013;Nielsen 2013;Winters and Martinez 2015). However, others conclude that the salience of governance in the recipient country frequently takes a backseat to the strategic interests of donor countries (e.g.…”