Foreign aids are important for the development of poor countries. Therefore, in the literature, special attention is given to the analysis of foreign aids. This chapter investigates the factors affecting flow of foreign aids to developing and less developed countries and also welfare impacts on foreign aids. For this purpose, panel data on 71 countries receiving aids from Development Assistance Committee member countries are employed for the period between 1996 and 2013. The results show statistically significant impacts of real income per capita, trade openness, migration flows as a share of total population and governance measures. Moreover, although foreign aids are found to improve the welfare of receipt countries, for donor countries, results do not indicate any evidence of welfare effects. As a conclusion, the poverty, donor's interest represented by decline in migration flows, and governance quality are found to be significant determinants of foreign aid allocation.
DOI: https://doi.org/10.4018/978-1-5225-7564-1.ch012
Publish Year: 2019
