Impacts of tangible and intangible elements of Aid for Trade on the globalisation of developing countries

Lee, Hyo Won; Kim, Youngwan

doi:10.1111/twec.12948

Cited by 2 publications

(7 citation statements)

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“…While these expected signs hold in almost all our specifications, they are statistically insignificant, except for column ( 5). Furthermore, one may expect that trade relationships with donors may have a positive impact on aid receipts (see Alessina & Dollor, 2000;Lee & Kim, 2020). This hypothesis is not supported by the results of our analysis in the case of Arab donors.…”

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Political economy of aid allocation: The case of Arab donors

2021

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By exploiting a unique data set on aid allocation by major Arab donors, this paper explores the relationship between aid allocation and the strategic alignment of donors with recipients as well as the developmental need of recipients. To motivate our empirical work, we first develop a new theory of aid allocation, wherein a representative donor country's payoff depends on both the well-being of the representative recipient country as well as its strategic alignment with the donor. Our theoretical model suggests that there exists a positive relationship between donor's aid allocation and the geopolitical and cultural alignment of the recipient country.Our model also predicts that donors allocate more aid to recipient countries with higher levels of country capacity. To test the prediction of our theory empirically, we construct a new measure of geopolitical and cultural alignment for recipient countries by using principal component analysis.We employ this measure and a set of control variables to show that the geopolitical and cultural alignment of a recipient country and its capacity to implement development projects are the key determinants of aid allocation from the Arab donors. K E Y W O R D SForeign Aid, geopolitical and cultural alignment, political economy of aid | 2461 KIBRIA et Al. | INTRODUCTIONAlthough the stated objective of foreign aid is typically the economic development of recipient countries, there is a perception that foreign aid may also be politically motivated. These political motives may even be overt. For example, United States aid to both Israel and Egypt since the Camp David Accords is designed to keep the peace between these two countries. However, political motives for aid are more often covert or without clearly stated political objectives. To what extent are foreign aid allocations due to the political alignment of recipient countries with donors rather than their development needs? This paper provides a theoretical framework to address this question and empirically assesses the predictions of the model.Foreign aid allocation in response to a recipient's position on a particular political issue, such as voting behaviour at the United Nations (UN), has empirically been addressed in the literature (see

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confidence: 60%

“…Furthermore, one may expect that trade relationships with donors may have a positive impact on aid receipts (see Alessina & Dollor, 2000; Lee & Kim, 2020). This hypothesis is not supported by the results of our analysis in the case of Arab donors.…”

Section: Empirical Analysismentioning

confidence: 99%

Political economy of aid allocation: The case of Arab donors

2021

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“…Most studies have involved 100 and more countries [e.g. 120 countries in Lee and Ries (2016); 126 in Gnangnon (2018a); 108 countries in Gnangnon (2020b); 113 countries in Lee and Kim (2020)]. There was even a study that involved only one country, namely, the Case of Nepal (Brazys and Elkink, 2020).…”

Section: Discussion and Findingsmentioning

confidence: 99%

“…The two-step GMM system has been particularly preferred to the one-step GMM system and the difference GMM. This approach has been used in most studies (Gnangnon and Roberts, 2017; Gnangnon, 2018d, 2018e; Ly-My et al , 2020; Lee and Kim, 2020). The method allows for the identification of potential endogeneity in the explanatory variables and the possible omitted variables biases.…”

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confidence: 99%

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Aid for trade initiative 16 years on: lessons learnt from the empirical literature and recommendations for future directions

Benziane

Law

Rosland

et al. 2022

JITLP

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Purpose The purpose of this paper is to present a review of empirical evidence on the effectiveness of Aid for Trade (AfT) inflows and recommend new areas of interest concerning the initiative other than its effect on trade performance. Design/methodology/approach This paper reviews a sample of 55 studies over the past 11 years. Besides, this paper categorised the reviewed empirical studies into three groups: the works concentrating on the trade performance effect; the works focusing on other economic factors effect; and the works concerning the allocation effect of these inflows. This paper also offers a detailed analysis of the multiple empirical methods, sources of data, coverage of the countries and forms of AfT inflows used in the reviewed literature. Findings Key findings indicated that AfT has overall produced a successful impact as reported by most studies. Moreover, it has been highlighted that the effectiveness of AfT may differ relying on multiple indicators: the category of AfT disbursements; income of the recipient country; the recipient country's geographical region; the amount of aggregate AfT as well as its main categories; the policy regulation and institutional quality of the recipient country; and the degree of liberalisation in the recipient country. Originality/value This paper is special in that it is the first to publish a comprehensive narrative analysis of 55 empirical pieces of evidence on the effectiveness of AfT over the past 11 years. It is also the first paper to review the previous literature regarding the effectiveness of AfT inflows on other non-trade outcomes, as well as trade outcomes in one single study. The outcome of the survey reveals new areas of interest in the effectiveness of AfT aside from trade performance.

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Impacts of tangible and intangible elements of Aid for Trade on the globalisation of developing countries

Cited by 2 publications

References 29 publications

Political economy of aid allocation: The case of Arab donors

Political economy of aid allocation: The case of Arab donors

Aid for trade initiative 16 years on: lessons learnt from the empirical literature and recommendations for future directions

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