Who Gives Aid to Whom and When? Aid Accelerations, Shocks and Policies

Abstract

We address the pitfalls of averaging by exploiting the longitudinal variation in aid to identify sudden and sharp increases in aid flows. Focusing on specific events, we testif aid accelerations correspond to policies and shocks in the recipient country. We find that positive regime changes and wars are significant predictors of aid accelerations. The results also suggest the presence of aid spill-overs, where neighbors of war-torn countries are almost as likely to experience large aid inflows. Disaggregating aid flows by donors, we find some indicative evidence for competing allocation rules among European donors. We argue that drivers of aid accelerationsdiffer from drivers of average aid flows - a distinction that can help reconcile some of the ambiguous empirical results in the aid literature.