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Survey of Foreign Aid: History, Trends and Allocation

Peter Hjertholm and Howard White
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Peter Hjertholm: Institute of Economics, University of Copenhagen

No 00-04, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: This paper (i) traces the historical origins of foreign aid, (ii) investigates tren­ds in the volume, composition, allocation and quality of aid flows, and (iii) reviews the empirical literature on aid allocation. The paper concludes that, historically, aid has served a multitude of objectives. For some donors, the allocation and quality of aid have been largely shaped by concern for the development needs of recipients. By contrast, the foreign aid of some larger donors has been used principally as a foreign and commercial policy tool. Yet while this particular character of aid flows may well have impaired the effectiveness of aid, there is no automatic contradiction between donor and recipient objectives. Perhaps the most important change in the aid picture is the reversal after 1992 of the historic upward trend in aid volumes. This may not be a problem when smaller aid flows are compensated by private flows, as has happened in several developing countries. Yet it may be a problem in low-income countries without access to private capital, which continue to rely on aid for financial resources. The underlying premises of donor-recipient cooperation are very different when aid resources become more limited, especially when debt service is still a factor of significance. The need to keep objectives and rationales clear turn out to be even more important.

Keywords: Foreign Aid; Aid Allocation (search for similar items in EconPapers)
JEL-codes: F35 O10 (search for similar items in EconPapers)
Pages: 131 pages
Date: 2000-03
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Citations: View citations in EconPapers (14)

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