Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/204716 
Year of Publication: 
2009
Series/Report no.: 
SITE Working Paper No. 5
Publisher: 
Stockholm School of Economics, Stockholm Institute of Transition Economics (SITE), Stockholm
Abstract: 
Although there exists a vast literature on aid efficiency (the effect of aid on GDP), and that aid allocation determinants have been estimated, little is known about the minute details of aid allocation. This article investigates empirically a claim repeatedly made in the past that aid donors herd. Building upon a methodology applied to financial markets, this article finds that aid donors herd similarly to portfolio funds on financial markets. It also estimates the causes of herding and finds that political transitions towards more autocratic regimes repel donors, but that transitions towards democracy have no effect. Finally, identified causes of herding explain little of its overall level, suggesting strategic motives play an important role.
Subjects: 
aid
herding
volatility
fragmentation
JEL: 
F34
F35
Document Type: 
Working Paper

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