Donor Behaviour: A Study of Swedish Aid

Abstract: This study analyses which factors has driven the allocation of Swedish aid between 1975 and 2003. The results are then compared to the official policy. The general goal of Swedish aid is to “help to raise the living standard for the poor”, but there are more factors than income status that affect allocation. Allocation of Swedish aid is affected by a set of criteria for the choice of recipient. The details and the goals of aid have changed over time even if the core has remained the same. According to the official policy, Swedish aid should be used to take responsibility across borders, to contribute to a greater common market and a peaceful development. It has been considered important that the recipients’ needs can be matched by Sweden’s capacity and that aid is developed from the recipients’ situation. The recipients’ absorption capacity is thus an important criterion. Summarized, Swedish aid should be used to promote democracy, fight corruption and contribute to more equal societies. In this study we do not find any significant relation between the official policy and actual allocation. A Generalized Least Square regression with Random Effects points out only two significant variables, the recipients’ size of trade (openness) and their former (British) colonial status. Instead of rewarding open economies, Swedish aid has been allocated to more closed economies which tend to be more corrupt. Although the majority of the recipient countries are former colonies, we find that former British colonies are favoured. This allocation is believed to be a result of the historical development of aid and practical circumstances such as language etc...