Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2009:19: Grants to needy countries? A study of aid composition between 1975 and 2005

Pernilla Johansson ()
Additional contact information
Pernilla Johansson: Ministry of Finance, Postal: Ministry of Finance , Drottninggatan 21, SE-10333 Stockholm, Sweden

Abstract: This paper studies whether the poorest and most indebted countries receive aid in the form of grants rather than loans. By studying bilateral aid flows to low- and middle-income countries between 1975 and 2005, the paper provides evidence on the determinants of the grant component of aid flows. While the empirical analysis finds no evidence that more indebted countries receive a higher grant component, it shows that poorer countries receive a significantly higher grant component of aid, although the size of the effect is rather limited.

Keywords: Aid composition; Aid allocation; Indebtedness; Poverty

JEL-codes: F34; F35

30 pages, December 17, 2009

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