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The International Foreign Aid Regime: who gets foreign aid and how much?

Stephanie Ogden February 2009. The International Foreign Aid Regime: who gets foreign aid and how much?. Tanweer Akram , Columbia University, Dept. of Economics Applied Economics , 2003, vol. 35*.

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The International Foreign Aid Regime: who gets foreign aid and how much?

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  1. Stephanie Ogden February 2009 The International Foreign Aid Regime: who gets foreign aid and how much? Tanweer Akram, Columbia University, Dept. of Economics Applied Economics, 2003, vol. 35* *Akram, Tanweer. 2003. “The international Foreign Aid regime: who gets foreign aid and how much?” Applied Economics. 35, 1351-1356.

  2. The questions addressed * Is the disbursement of foreign aid tied directly to the needs of developing countries? * Or, contrarily, is it tied to the interests of the donor countries? Is the greatest amount of foreign aid being given to the countries with the greatest need?

  3. Data Source 2002 World Development Indicators Database for the period:1960-2000 World Bank Per country statistics for net official development assistance & net official aid

  4. First steps in data analysis *How much aid does each country receive? Volume of foreign aid Per capita foreign aid *How dependent is a country on foreign aid? Foreign aid as a percentage of gross national income as a percentage of central govt. expenditure as a percentage of international trade

  5. Methods of Data Analysis A Series of regression analyses over different time periods: Ordinary Least Squares (OLS) Official foreign aid = β0 + β1(Log[Per capita income]) + β2(Log[Per capita income]2) + β3(Log[population]) + β4(Log[population]2) +… General Least Squares (GLS) Per capita foreign aid = β0 + β1(Log[Per capita income]) + β2(Log[Per capita income]2) + ….

  6. Sample Results Ordinary Least Squares (OLS): for time period 1970 - 2000 Official foreign aid = β0 + 1.55(Log[Per capita income]) – 0.12(Log[Per capita income]2) + β3(Log[population]) + β4(Log[population]2) +… Adjusted R2 = 0.45 All values significant beyond the 0.05 level General Least Squares (GLS): for time period 1970 - 2000 Per capita foreign aid = β0+ 2.32(Log[Per capita income]) – 0.16 (Log[Per capita income]2) + …. Adjusted R2 = 0.82 All values significant beyond the 0.05 level

  7. Results • Official Foreign Aid to a country seems to increase as its per capita income increases, though this increase is less pronounced as the countries enter middle income status. • Official Foreign Aid to a country increases as its population increases. • Official Per Capita Foreign Aid to a country seems to increase as its per capita income increases, though this increase is less pronounced as the countries enter middle income status.

  8. Results & Policy Implications The level of per capita income of a country does not seem to have any affect on the foreign aid received. The poorest countries do not seem to be getting the most per capita foreign aid. If the objective of foreign aid is to help countries most in need, we must re-examine the criteria by which foreign aid is dispersed. Map of World Bank Income Groupings, 2006 http://commons.wikimedia.org/wiki/File:World_Bank_income_groups.png

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