Official development assistance: The effectiveness of a benefit-oriented motive

Marina Mikitchuk

Journal of the New Economic Association, 2025, vol. 67, issue 2, 168-189

Abstract: This article presents an empirical study of the effectiveness of Official Development Assistance (ODA). For the first time, robust conclusions on the impact of aid on the recipient's economic growth, taking into account the quality of its governance and the donor motivation, were obtained at the cross-country level. The econometric analysis, based on data for 1991-2019 on 59 recipients, showed that for a recipient with good governance, assistance is effective regardless of motivation and volume, and has decreasing marginal utility. The result reaffirms the importance of the recipient's governance quality and the exhaustion of opportunities for the effective use of ODA as its volumes grow. In countries with underdeveloped political institutions, ODA is effective only when it is benefit-oriented and comes in significant amounts, otherwise it leads to a decrease in economic growth. Probably such a recipient is not able to resist a donor pursuing its own selfish interests, as well as independently cope with the negative consequences of assistance, in particular, a syndrome similar to the Dutch disease. Significant amounts of benefit-oriented aid, which indirectly indicate the attention of the donors to ODA implementation mechanisms, can prevent negative impact. The results obtained expand the understanding of the necessary conditions of aid effectiveness.

Keywords: official assistance; donor motivation; tied aid; collaboration; panel data analysis (search for similar items in EconPapers)
JEL-codes: C33 F35 O43 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2025:i:67:p:168-189

DOI: 10.31737/22212264_2025_2_168-189

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