How Much and To Whom?: Examining the Possible Determinants of Foreign Aid and its Effects on Population Health

Abstract

Foreign aid is regarded as a prominent tool to support developing countries in their economic and social development. The global political landscape has changed significantly since 2000. Alesina and Dollar(2000) analyzed the determinants of aid flows up to 2000 and found that strategic considerations were important drivers of aid. This paper investigates whether these patterns have continued for the subsequent 20 years, or if strategic priorities have changed by considering foreign direct investment, national income per capita, population, trade freedom, political rights, government liberalism similarity and colonial history. I find that colonial history is a major determinant of amount of aid given. I also identify changes over time in which the predictive effect of some determinants change, possibly indicating that donor countries are changing their strategic considerations in regard to which recipient countries to give aid to. I continue with an analysis of health outcomes as a dependent variable of health aid and total aid to see if it has been effective in improving the health of citizens in recipient nations. Similar to previous studies, I find that both overall foreign aid and health sector specific aid are effective for a few population health outcomes, but not others. This disagreement calls for further research on the avenues of development that aid is affecting and the variability of implementation changes a country may be making in and out of the health sector.