Tied Aid and Donor Generosity: How Tied Aid Affects Donor Utility and Changes Commitment Size Open Access

Mashman, Devin (Spring 2018)

Permanent URL: https://etd.library.emory.edu/concern/etds/mk61rg92z?locale=en
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Abstract

 

Tied aid conditions bilateral aid packages, specifying that they must only purchase goods from the donor country. This paper offers a novel theory that tied aid policies incentivize donors to behave more generously in their aid allocations. After assessing this theory through a multiple regression analysis of donor-recipient-year level observations of DAC donors, the paper shows mixed results. While the initial regression indicates an unexpected negative relationship, later models show that tied aid and commitment size may have a non-monotonic relationship. However, the results remain inconclusive between these two possibilities. Depending on the true effect of tied aid, substantial policy implications for the tying of aid would follow, either offering a potential justification for the practice or removing that justification altogether.

 

Table of Contents

 

Table of Contents

I. Introduction………………..…............…………………....…………………………Page 1

II. Literature Review…….……………..…………..………………………………..…Page 5

III. Theory…...…………………………………..………....…………………………Page 12

IV. Methods…………………….…………..…………………………………………Page 18

V. Results………...…………………………….…..…………………………………Page 25

VI. Conclusion…………………………………..……………………………………Page 35

 

Figures and Appendices

Figure 1: Proportion of Tie Aid to Total Bilateral Commitments……………………Page 3

Figure 2: Standard Donor Utility……………………..………………………………Page 14

Figure 3: Effect of Aid Tying on Donor Utility………………………………………Page 15

Figure 4: Effects of Aid Tying Across Models 5 and 6………………………………Page 34

 

Table 1: Regression Models 1 through 4……………..………………………………Page 27

Table 2: Regression Models 5 and 6……...…………………………………………Page 32

 

Appendix A: Donor Countries Included in the Multiple Regression Sample…..........Page 39

Appendix B: Recipient Countries Included in the Multiple Regression Sample.....…Page 39

Appendix C: Average Proportion of Tied Aid by Year, 2003-2014……....……….…Page 41

Appendix D: Average Proportion of Tied Aid by Donor Country…...…..…..………Page 42

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