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EU Aid and Foreign Direct Investment - A Study of the Effectiveness of EU Sector ODA on FDI in Developing Countries

Linder, Karin LU (2014) NEKH01 20142
Department of Economics
Abstract
Research on aid is continuously exploring new channels to measure its effectiveness on economic development. The Millennium Development Goals have set the standard for aid policy-making and now, when facing deadline, its partakers have to set a new aid policy-agenda. The European Union is the largest donor of official development assistance (ODA), contributing a total of 50-60 percent of world ODA. Still the EU struggles with finding conclusive evidence of the effectiveness of aid. In the light of the above, this paper provides a panel data regression analysis of whether EU aid shows any short-term effect on foreign direct investments in developing countries and if so, if it is possible to distinguish what kind of EU aid is most effective... (More)
Research on aid is continuously exploring new channels to measure its effectiveness on economic development. The Millennium Development Goals have set the standard for aid policy-making and now, when facing deadline, its partakers have to set a new aid policy-agenda. The European Union is the largest donor of official development assistance (ODA), contributing a total of 50-60 percent of world ODA. Still the EU struggles with finding conclusive evidence of the effectiveness of aid. In the light of the above, this paper provides a panel data regression analysis of whether EU aid shows any short-term effect on foreign direct investments in developing countries and if so, if it is possible to distinguish what kind of EU aid is most effective in doing so. ODA is subcategorized into three target sectors: economic infrastructure, production sectors and social infrastructure. The study takes its stand from FDI- and aid theory, relative developing countries and in the light of the EU. The effectiveness of EU ODA on FDI-inflows to developing countries is tested using a fixed effects OLS estimator and undergoes three sensitivity checks. The result shows that EU ODA has a positive statistical significant effect in promoting FDI and that a narrower approach is required to determine the sectorial effects respectively. (Less)
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author
Linder, Karin LU
supervisor
organization
course
NEKH01 20142
year
type
M2 - Bachelor Degree
subject
keywords
ODA, FDI, EU, developing countries, panel data regression analysis
language
English
id
4699382
date added to LUP
2014-10-30 12:58:22
date last changed
2014-10-30 12:58:22
@misc{4699382,
  abstract     = {Research on aid is continuously exploring new channels to measure its effectiveness on economic development. The Millennium Development Goals have set the standard for aid policy-making and now, when facing deadline, its partakers have to set a new aid policy-agenda. The European Union is the largest donor of official development assistance (ODA), contributing a total of 50-60 percent of world ODA. Still the EU struggles with finding conclusive evidence of the effectiveness of aid. In the light of the above, this paper provides a panel data regression analysis of whether EU aid shows any short-term effect on foreign direct investments in developing countries and if so, if it is possible to distinguish what kind of EU aid is most effective in doing so. ODA is subcategorized into three target sectors: economic infrastructure, production sectors and social infrastructure. The study takes its stand from FDI- and aid theory, relative developing countries and in the light of the EU. The effectiveness of EU ODA on FDI-inflows to developing countries is tested using a fixed effects OLS estimator and undergoes three sensitivity checks. The result shows that EU ODA has a positive statistical significant effect in promoting FDI and that a narrower approach is required to determine the sectorial effects respectively.},
  author       = {Linder, Karin},
  keyword      = {ODA,FDI,EU,developing countries,panel data regression analysis},
  language     = {eng},
  note         = {Student Paper},
  title        = {EU Aid and Foreign Direct Investment - A Study of the Effectiveness of EU Sector ODA on FDI in Developing Countries},
  year         = {2014},
}