Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/90577
Authors: 
Fuchs, Andreas
Dreher, Axel
Nunnenkamp, Peter
Year of Publication: 
2012
Series/Report no.: 
Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 121
Abstract: 
What determines the foreign aid effort of donor countries? We review the existing literature on donors' aid budgets and examine which of the suggested variables robustly determine aid effort, measured as Official Development Assistance (ODA) as a share of gross national income. More specifically, we empirically test 16 hypotheses using panel econometric methods for member countries of the Development Assistance Committee (DAC) in the 1976-2008 period. To test for the robustness of our results, we extend our dataset to 48 possible determinants of aid budgets and apply an Extreme Bounds Analysis (EBA). In our fixed effects regressions, we find that aid inertia, the donor country's GDP per capita, the existence of an independent aid agency, and colonial history have a robust and quantitatively relevant impact on countries' aid efforts. Among the potential substitutes for aid, remittances exert a robust effect. Excluding year fixed effects, political globalization, Russian military capacity, peer effects, aid effectiveness, and government debt also play a significant role.
Subjects: 
Foreign aid
Official Development Assistance
Aid budget
Extreme Bounds Analysis
JEL: 
F35
H81
H87
Document Type: 
Working Paper

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