Aid Allocation and Aid Effectiveness: An Empirical Analysis

Abstract

Why do some poor countries receive so much aid, and others so little? Humanitarian, commercial, political and strategic motives are usually identified as the main factors driving the aid allocation process. This is consistent with policy statements, especially from the major donors, which assert that aid is motivated by a humanitarian concern to promote development and alleviate need, especially in the most deprived countries, but at the same time also by commercial, political and strategic self-interest. The vast empirical literature dealing with the determinants of aid allocation clearly concludes that donors pursue political, economic and strategic interests in inter-country aid allocation, especially with regard to bilateral aid allocation of the larger donors, and that developmental or humanitarian concerns, such as the reduction of poverty, receive a relatively low or even zero weight in this process (see McGillivray, 2004, for a comprehensive discussion).