Untying the motives of giving grants vs. loans

Khusrav Gaibulloev and Javed Younas

European Journal of Political Economy, 2018, vol. 51, issue C, 1-14

Abstract: The aid allocation literature has assumed that two forms of aid flows – grants and concessional loans – are determined identically. Its findings reflect average behavioral patterns based on an aggregate of these two distinct transfer types. This analysis shows that the past findings generally apply to grants but not to concessional loans. In particular, the amount of grants decreases with income, whereas the amount of concessional loans increases with income. However, donors increase both grants and loans to politically aligned administrations during election years irrespective of recipients’ income level. Other econometric issues such as endogeneity of income and cross-sectional dependence are taken into account.

Keywords: Foreign aid; Grants; Concessional loans; Welfare (search for similar items in EconPapers)
JEL-codes: F35 O10 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:51:y:2018:i:c:p:1-14

DOI: 10.1016/j.ejpoleco.2017.04.004

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