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Authors
Abstract(s)
Official Development Assistance (ODA), also known as foreign aid, is one of the most important sources of development finance for numerous countries. The present research aims to answer to distinct, but interrelated questions, regarding the nature, motivations and consequences of the aid flows established between developed and developing countries: (i) Does the concept of ODA accurately reflect the aid nature of the flows with origin in advanced countries? (ii) What are the motivations and constraints that influence the decisions of donors regarding the volume and the beneficiaries of ODA? (iii) What are the possible effects of ODA in certain socio-economic indicators of the recipient countries? The use of data on ODA is widespread in either academic work, governments’ planning, or public discourse. This research points out that the use of such data should take into consideration a number of relevant shortcomings of the underlying concept of ODA. The way that ODA is defined, which has recently been subject to significant changes, can decisively influence the way that its impact on recipients is appraised. It is concluded that, indeed, the ODA concept has a number of relevant insufficiencies, namely: the definition is primarily focused on the donor effort perspective and not on the benefits for recipients; the discount rate applied to loans has been excessive for a considerable number of years; the record of debt relief has implied a lag between the moment in which the recipients benefit from the actual entry of goods and services and the moment in which these become ODA; technical cooperation activities have included items which are, in effect, pure internal costs for the donors; and, the payment of interest on ODA loans was not reportable as negative ODA. With regards to aid allocation, a comprehensive theoretical framework for the subject is presented, establishing that ODA allocation results from a complex interaction between several components, namely the donors’ motivations (ideational, political, ideological, commercial, securitarian and cultural) and the recipients’ characteristics (invariant structural conditions, stable structural conditions, domestic policies and exceptional events). Empirically, this study analyses a vast number of bilateral and multilateral donors and recipients. In addition to regression analysis, and for the first time, to the best of our knowledge, principal-component factor analysis is used to identify distinctive groups of donors and recipients during the period 1990-2015. The results revealed four distinct clusters: (i) the proportionally largest Western European donors, characterized by a significant number of beneficiaries, especially low-income countries; (ii) donors that are predominantly driven by structural links with recipients, especially derived from colonial connections; (iii) a group of mainly Eastern European donors who are engaged with lower-income countries in Eastern Europe and Western Asia; and (iv) a group of Asian and Oceanian donors that select their partners mainly based on the geographical proximity criterion. The results also show that the level of income of recipients has a significant negative association with the aid received, while the level of democracy has a positive association. There is no evidence that the level of corruption of recipients is a significant criterion for bilateral aid allocation, and disaster aid may not be additional, but could simply be replacing other aid. The former colonies of the United Kingdom and France suffer from a negative bias from other donors. The European Union seems to pay special consideration to the level of democracy, but not to the level of corruption, as opposed to the World Bank. With respect to ODA impacts, this study examines the role of aid within the different theoretical approaches to development and, for the first time in the literature, establishes and systematises an integrated perspective of such role. The arguments against and in favour of granting official aid, postulated by each of the theories, are presented, as well as the way aid should be primarily allocated to maximise its positive effects. This work also empirically assesses ODA’s possible macro-effects through a GMM dynamic panel data model, resorting to an instrumental variables approach based on a model of donors’ aid allocation. The results reveal a statistically non-significant effect of ODA by itself on growth, but the interactive term between aid and the absence of corruption shows a positive and significant sign. The results therefore suggest that ODA has been less effective for boosting economic growth in more corrupt countries. As corruption is non-significant for aid allocation, but positively significant for growth, it can be postulated that the absence of the evidence of a positive impact of aid on growth could be due to the fact that aid has not been primarily granted to low-corruption countries, which thus makes it more difficult to materialize its supposed macro-impact. The main policy recommendations associated with the findings of the present study establish that donors should ensure that disaster and conflict-related aid is additional and not a substitute, and that the reasons for certain allocation biases should be pondered. Furthermore, in order to maximise its effects on recipients’ growth, it is advisable that aid should be granted primarily to less corrupt countries (a situation that, according to the results of the assessment on aid allocation, did not occur), consequently improving its potential macroeconomic effectiveness. This does not necessarily mean that donors should not grant aid to countries with higher levels of corruption, but rather that, instead of focusing initially on large scale assistance, whose reproductive effect in terms of economic growth may not be assured due to the prevailing institutional framework, donors should instead, during an initial phase, focus on activities and programs that contribute to improving the level of governance and the institutional framework of recipients, namely to reduce the risk of corruption, with the objective to foster conditions for future growth.
Description
Doutoramento em Estudos de Desenvolvimento
Keywords
Official Development Assistance concept measurement motivations impacts quantitative analysis effectiveness development cooperation
Pedagogical Context
Citation
Francisco, Paulo Jorge Santos (2024). "Ajuda pública ao desenvolvimento : insuficiências conceptuais, determinantes da afetação e efeitos nos recipientes". Tese de Doutoramento. Universidade de Lisboa. Instituto Superior de Economia e Gestão.
Publisher
Instituto Superior de Economia e Gestão