An Empirical Analysis of the Motivations Behind Foreign Aid Distribution

: Developed countries have been allocating vast amounts of funds as foreign aid to developing nations. However, foreign aid policy has been attracting a lot of criticism. One prominent criticism is that foreign aid allocations have not been determined by the needs of the recipient countries. This paper addresses this issue and examines the determinants of official development assistance allocations including both bilateral and multilateral foreign aid over the period 2000-2005. The empirical findings reveal the complex nature of foreign aid allocations. The aid donors did tend to provide larger amounts of foreign aid to the poorer developing nations, but at the same time, empirical evidence indicates a distortion in the direction of the aid flows where the developing countries with smaller population were given more foreign aid.