What Determines Bilateral Aid Distribution? Evidence from Major Donors

Many studies in international development demonstrate that foreign aid is not simply distributed according to the needs of developing countries. Bilateral Official Development Assistance allocation for example is often dictated by donor interests that are not directly connected to development. This paper uses regression analysis to identify the donor interests involved in bilateral aid distribution, or in other words, what factors matter to each donor country's aid allocation and how much each factor contributes to the amount a donor allocates. The sample consists of the four leading aid is mainly dictated by global strategic concerns which can be hardly explained by the U.S.' political, economic, or regional interests, and Japan's aid allocation is largely driven by its preference for Asia and former colonies. Similarly, U.K. aid can be explained by preference for former colonies and political concerns. Canadian aid, on the other hand, primarily considers the humanitarian needs of recipient countries.