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What Determines the Allocation of Aid? Anke Hoeffler, Centre for the Study of African Economies, University of Oxford Verity Outram, Centre for the Study of African Economies, University of Oxford Download the Paper (PDF format) - July 1, 2008 Tell a colleague about it. Printing Tips: Select 'print as image' in the Acrobat print dialog if you have trouble printing. ABSTRACT: Previous studies into aid allocation have concluded that foreign aid is allocated not only according to development needs but also according to donor self-interest. We revisit this topic and allow for donor as well as recipient specific effects in our analysis. Our results indicate that roughly half of the predicted value of aid is determined by donor specific effects. Of the remaining variation, recipient need accounts for 36 percent and donor selfinterest for about 16 percent. This suggests that the previous literature has overstated the importance of donor self-interest. However, bilateral donors seem to place little importance on recipient merit. Recipient merit, measured by growth, democracy and human rights, accounts for only two percent of predicted aid. SUGGESTED CITATION: Anke Hoeffler and Verity Outram, "What Determines the Allocation of Aid?" (July 1, 2008). The Centre for the Study of African Economies Working Paper Series. Working Paper 299. http://www.bepress.com/csae/paper299