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Herding in Aid Allocation

Emmanuel Frot () and Javier Santiso ()

No 5, SITE Working Paper Series from Stockholm School of Economics, Stockholm Institute of Transition Economics

Abstract: Although there exists a vast literature on aid efficiency (the effect of aid on GDP), and that aid allocation determinants have been estimated, little is known about the minute details of aid allocation. This article investigates empirically a claim repeatedly made in the past that aid donors herd. Building upon a methodology applied to financial markets, this article finds that aid donors herd similarly to portfolio funds on financial markets. It also estimates the causes of herding and finds that political transitions towards more autocratic regimes repel donors, but that transitions towards democracy have no effect. Finally, identified causes of herding explain little of its overall level, suggesting strategic motives play an important role.

Keywords: aid; herding; volatility; fragmentation (search for similar items in EconPapers)
JEL-codes: F34 F35 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2009-07-20, Revised 2009-10-02
New Economics Papers: this item is included in nep-dev
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

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Journal Article: Herding in Aid Allocation (2011) Downloads
Working Paper: Herding in Aid Allocation (2009) Downloads
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