Aid Effectiveness: Politics Matters

Matteo Bobba and Andrew Powell

No 1598, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: The literature on aid effectiveness has focused more on recipient policies than the determinants of aid allocation yet a consistent result is that political allies obtain more aid from donors than non-allies. This paper shows that aid allocated to political allies is ineffective for growth, whereas aid extended to countries that are not allies is highly effective. The result appears to be robust across different specifications and estimation techniques. In particular, new methods are employed to control for endogeneity. The paper suggests that aid allocation should be scrutinized carefully to make aid as effective as possible.

Keywords: WP-601 (search for similar items in EconPapers)
JEL-codes: C23 O1 O10 O11 O12 O13 O14 O15 O16 O17 O18 O19 O2 O20 O21 O22 O23 O24 O25 O29 O4 O40 O41 O42 O43 O44 O47 O49 (search for similar items in EconPapers)
Date: 2007-01
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:1598

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