Biases in the allocation of foreign aid: Some new evidence

Dowling, John Malcolm; Hiemenz, Ulrich

doi:10.1016/0305-750x(85)90055-5

Cited by 61 publications

(37 citation statements)

References 1 publication

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“…Furthermore, Alesina and Dollar (2000) find evidence for a middle income bias that was also already suggested by Isenman (1976) and Dowling and Hiemenz (1985), even though the latter did not find evidence for it in their own study. Very poor countries often tend to receive less aid than less poor countries.…”

Section: Literature Reviewmentioning

confidence: 65%

“…Maizels and Nissanke (1984) Isenman (1976) and Dowling and Hiemenz (1985) that less populous countries receive more per capita aid than more populous ones. A wide range of reasons is offered in explanation of this bias from decreasing marginal benefits of aid allocation as population increases, to the limited capacity of large countries to absorb additional amounts of aid and potentially greater aid effectiveness in small countries.…”

Section: Literature Reviewmentioning

confidence: 99%

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The Determinants of Aid Allocation by Regional Multilateral Development Banks and United Nations Agencies

2003

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This paper examines which factors can explain the allocation of aid by four regional development banks as well as three United Nations agencies. The results suggest the following: most donors examined also exhibit a bias apparent in bilateral aid allocation in favor of less populous countries. Some of them also share another bias of bilateral donors who give more aid to their former colonies. However, the three United Nations agencies contravene a third bias of bilateral aid allocation and provide more aid to countries geographically more distant from the centers of the Western world. While the regional development banks with the possible exception of the Inter‐American one focus exclusively on economic need as measured by per capita income, the three United Nations agencies also take into account human development need in their aid allocation as measured by the Physical Quality of Life Index. Some tentative evidence is found that respect for political freedom is rewarded with higher aid receipts at the aggregate multilateral level and by the Inter‐American Development Bank as well as perhaps, in a few estimations, two of the three United Nations agencies. Neither respect for personal integrity rights nor low levels of perceived corruption play any role in the allocation of aid by the donors looked at. In general, higher military expenditures and arms imports are not associated with higher aid receipts, with a few notable exceptions.

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Section: Literature Reviewmentioning

confidence: 65%

Section: Literature Reviewmentioning

confidence: 99%

The Determinants of Aid Allocation by Regional Multilateral Development Banks and United Nations Agencies

2003

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“…-The size of recipients' population: it has been argued as an important factor in bilateral aid allocated by donors (see for e.g., Alesina and Dollar, (2000); Bandyopadhyay and Wall (2007); Dowling and Hiemenz, (1985); Isenman (1976); Trumbull & Wall (1994) ;Wall, (1995)). The arguments put forth are summarized by Younas (2008) as follows: (i) the marginal impact of aid decreases as the population increases; (ii) high population countries lack the administrative expertise to absorb large amounts of aid; (iii) it is relatively easier for donors to wield political influence over a smaller country than a large country.…”

Section: Equation Specification For Development Aid Flowsmentioning

confidence: 99%

Does Trade Openness Contribute to Driving Financing Flows for Development?

Brun¹,

Gnangnon²

2017

WTO Working Papers

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Trade has been recognized in the 2030 development Agenda as well as in the Addis Ababa Agenda for Action as an important means for the implementation of the Sustainable Development Goals (SDGs). This paper questions whether trade openness could be an important driver of financing for development flows, notably development aid (ODA), Foreign Direct Investment (FDI) inflows, and government public revenue, the latter being the ultimate financing source for development for any country. The paper also takes advantage of the framework of analysis to investigate the interplay between these three types of financial flows. Relying on an unbalanced panel dataset comprising 125 countries, of which 37 are Least Developed Countries (LDCs), the empirical analysis uses the three stage least squares econometric approach and provides two important pieces of evidence: first, international trade openness is an important tool for driving financial flows for development, including government public revenue, development aid and FDI. As a result, it could contribute to mobilizing the substantial financial resources needed for development, including for the implementation of the SDGs. Second, there are strong interactions (complementarity and substitutability) between these three types of financing for development flows.

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“…The population bias occurs when donors prefer to give aid to small and less populous countries where the impact of foreign aid is likely to be more visible (Gillis and others, 1992) and where the cost of buying voting compliance in the UN General Assembly is lower. Dowling and Hiemenz (1985) provide evidence for the population bias while Maizels and Nissanke (1984) do not, probably because donors may also want to strengthen ties with large and potentially powerful developing countries in order to increase their political and cultural influence. The middle-income bias posits an inverted U-shaped relationship between income per capita in the recipient and the amount of aid it receives, on the grounds that the absorptive capacity constraint is less binding in middle-income countries.…”

Section: A Factors Affecting Bilateral Aid Allocationmentioning

confidence: 99%

“…The middle-income bias posits an inverted U-shaped relationship between income per capita in the recipient and the amount of aid it receives, on the grounds that the absorptive capacity constraint is less binding in middle-income countries. Dowling and Hiemenz (1985) note that middle income countries have more economic and political weight and well-developed bureaucracies that can administer the aid and use it more effectively are in place.…”

Section: A Factors Affecting Bilateral Aid Allocationmentioning

confidence: 99%

Do Remittances Reduce Aid Dependency?

Goff

Kpodar²

2011

IMF Working Papers

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Aid has been for decades an important source of financing for developing countries, but more recently remittance flows have increased rapidly and are beginning to dwarf aid flows. This paper investigates how remittances affect aid flows, and how this relationship varies depending on the channel of transmission from remittances to aid. Buoyant remittances could reduce aid needs when human capital improves and private investment takes off. Absent these, aid flows could still drop as remittances may dampen donors' incentive to scale up aid. Concurrently, remittances could be positively associated with aid if migrants can influence aid policy in donor countries. Using an instrumental variable approach with panel data for a sample of developing countries from 1975-2005, the baseline results show that remittances actually increase aid dependency. However, a refined model controlling for the channels of transmission from remittances to aid reveals that remittances lead to lower aid dependency when they are invested in human and physical capital rather than consumed. JEL Classification Numbers: F35, F24, O10

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Biases in the allocation of foreign aid: Some new evidence

Cited by 61 publications

References 1 publication

The Determinants of Aid Allocation by Regional Multilateral Development Banks and United Nations Agencies

The Determinants of Aid Allocation by Regional Multilateral Development Banks and United Nations Agencies

Does Trade Openness Contribute to Driving Financing Flows for Development?

Do Remittances Reduce Aid Dependency?

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