Aid Allocation across Sectors: Does aid fit well with recipients' development priorities?

Author Name KASUGA Hidefumi  (Kansai University)
Creation Date/NO. November 2008 08-E-039
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This paper investigates whether aid flows to developing countries fit well with their development priorities. In particular, we examine aid allocation across sectors in a given recipient country by using sectoral data on aid and indicators that measure the recipient's need for aid in each sector. The data show that inter-recipient aid allocation reflects the recipient's need. However, we found no evidence that inter-sectoral allocation fits with national priorities except in high- and middle-income East Asian countries. Our evidence shows that the quality of bureaucracy and corruption in recipient countries impede efficient inter-sectoral allocation.