Political Economy of Foreign Aid: Evidence from Asian Countries

Abstract

What determines the aid effectiveness in panel of selected Asian Countries? This study reviews the existing literature on political determinants of aid effectiveness. More specifically, this study empirical examines the determinants of aid effectiveness by using panel econometric technique for Asian countries in 1990-2011 periods. In random effect regression, results shows that all variables i.e. corruption, internal conflict, government stability, population and openness significantly affect net official development assistance in recipient countries. Internal conflict and government stability negatively affect the net official development assistance. Furthermore corruption and other variables have positive influence on net official development assistance as percentage of gross national income.