Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Bergen, Department of Economics

No 02/14: Does better governance and commitment to development attract general budget support?

Ingvild Nordtveit ()
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Ingvild Nordtveit: Department of Economics

Abstract: General budget support (GBS) is funding which is not earmarked for a specific sector or project, but is provided as direct financial support to the public sector in the recipient country. This type of aid is argued to have a positive effect on aid efficiency if it is targeted at countries with good governance and a strong commitment to development. In this study, data on commitments of official development assistance (ODA) from 23 DAC donors to 115 recipient countries in the period from 1995 to 2009 is used to estimate the probability of receiving GBS. The results show that the DAC donors are selective with respect to the quality of governance, and there is some support for the notion that the recipient governments’ commitment to development is a significant determinant for the allocation of GBS. Empirical evidence showing that DAC donors are more selective when allocating GBS than with program aid in total is also presented, underlining the importance of using disaggregated data when analyzing aid allocation.

Keywords: aid allocation; general budget support; good governance; commitment to development

JEL-codes: F35

50 pages, April 10, 2014

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