The purpose of this paper is to study a little researched relation: the relation from economic growth in a less developed country to the development aid it receives. Does economic growth influence donor aid allocation decisions?
The authors’ apply two different methodologies. First, a quantitative and systematic review is presented of the literature of 30 empirical studies of aid allocation where a growth coefficient is estimated. Second, a primary study is presented of the data using a panel of 147 countries for the period 1967‐2004.
The growth‐aid relation should be negative if humanitarian motives dominate aid allocation decisions. The result from both the meta‐analysis and the primary data analysis suggests a very small effect between lagged growth and aid allocations, with a dominating positive sign. This result appears to be driven partly by the large development banks.
No attempt has previously been made to summarize the literature on growth as a motive for giving aid. This paper offers the first attempt to do so, by presenting a meta‐analysis of the empirical literature, as well as analysis of the primary data.
