The Role of Governance in Determining Foreign Aid Flow Composition

We hypothesize that selective donors will use types of aid over which they have more control when providing assistance to poorly governed countries. We use an original classification of project purpose codes in the AidData dataset to categorize aid flows from the period 2004 to 2010. Results from fixed effect and compositional data models provide evidence of selectivity in terms of overall aid flows, a tradeoff between technical assistance and programmatic lending, and a tradeoff between social sector and infrastructure projects.