Study on the impact of donors' AID transparency on their AID volume

Abstract

While the international development cooperation community is bearing a double burden of increasing the volume of foreign aid and enhancing its effectiveness and accountability at the same time, this study aims to explore whether aid transparency of donor agencies, among other determinants of foreign aid, has any impact on their aid volume. Fixed effects regressions using panel data over 2011-2017 for 51 donor agencies in 36 donor countries are used in the analysis. The results find that donor agencies in more populated countries spare less aid budget, implying the existence of economies of scale. On the political side, donors with more women in parliaments tend to show higher generosity, while fractionalized opposition party has negative influence. In addition, pro-poor donors with larger government and social expenditure appear to also spend more for international redistribution. However, in contrast to existing studies, domestic inequality proxied by income held by the bottom quantile and Gini coefficient is examined to be positively correlated with foreign aid. Aid transparency of donor agencies, captured by Aid Transparency Index and its separate components, is found to be insignificant as determinants of aid allocation decisions.