Econometric Models of Governmental Aid to Multilateral Agencies

Abstract

This paper investigates the extent to which donors' multilateral aid is affected by conditions in their own economics. For this purpose, we use multiple regression techniques consisting of a pooling of cross-section and time series observations on a sample of eight major DAC members (United States, Germany, United Kingdom, France, Netherlands, Sweden, Norway, Denmark) over a 15-year period (1968 to 1982). Despite the highly speculative nature of such an analysis -- the volume of aid is ultimately a political decision -- the results seem to indicate that economic factors, such as the growth of GNP, the budget surplus or the balance of payments position might influence the volume of multilateral aid. Futhermore, a comparison of the multilateral and bilateral aid outlayls seems to suggest that they are differently influenced by economic factors. However, these results are only statistically significant when the volume of aid is expressed in absolute terms (nominal or real terms). When it is expressed as a proporation of GNP, only the GNP per capita is significant as a predictor.