25 Years of Aid Allocation Practice: Whither Selectivity?

The 4P framework (Poverty, Population, Policy, and Proximity) is introduced as a way of understanding a donor’s aid allocation. We use the two-part model and examine the period 1982–2006. The results indicate that recent conclusions of increasing selectivity are misplaced for the seven major donors analyzed, who together represent the majority of development aid. Indeed, the effect of each of the commonly mentioned time-trends (selectivity, the end of the Cold War, and the commencement of the Global War on Terror) is much smaller than the role of donor heterogeneity, which appears sizeable and entrenched. Note: Working paper versions of this article are available under the title '25 Years of Aid Allocation Practice: Comparing Donors and Eras', Credit Working Paper 2009 (09/11) and CSAE Conference Paper 2010 (155) The CREDIT WP contains more information on the choice between Two-Part, Heckman and Tobit models