Skip to main content
SpringerLink
Log in

Do Health Conditions Determine the Flow of External Health Resources? Evidence from Panel Data

  • Original Article
  • Published:
The European Journal of Development Research Aims and scope Submit manuscript

Abstract

This article examines the determinants underlying the decision to select a recipient country and the decision about how much health aid to transfer, using data from 22 bilateral donors and 160 recipient countries between 1990 and 2007. Many different factors influence the decisions at each of the two decision stages. Whereas a suite of health indicators – maternal and child health as well as HIV/AIDS – influence the selection decision, only HIV/AIDS matters for the actual funding decision. Poor countries have greater selection chances and attract greater aid shares. The corruption level does not play a significant role in the decision-making process. Domestic health expenditures are associated with a greater chance of being selected as a recipient. Decisions taken by bilateral donors are not affected by multilateral donors. Not only is the donor–recipient relationship a significant explanatory factor, but so are a donor’s characteristics.

Abstract

Cet article étudie les déterminants sous-jacents qui influencent la décision de sélectionner un pays récipiendaire ainsi que le montant de l’aide à la santé, grâce aux données de 22 bailleurs de fonds bilatéraux et 160 pays récipiendaires entre 1990 et 2007. De nombreux facteurs influencent chacune des deux décisions. Alors qu’une série d’indicateurs de santé – sur la santé de la mère et de l’enfant ainsi que sur le VIH/SIDA – influence la sélection du pays, les indicateurs sur le VIH/SIDA sont les seuls pris en compte pour la décision de financer le pays. Les pays pauvres ont plus de chance d’être sélectionnés et de recevoir une plus grande part de l’aide au développement. Le niveau de corruption du pays ne joue aucun rôle particulier dans le processus de décision. Les dépenses domestiques de santé sont associées avec l’augmentation de la probabilité d’être sélectionné en tant que pays récipiendaire. Les décisions prises par les bailleurs bilatéraux ne sont pas influencées par les décisions des bailleurs multilatéraux. La relation bailleur-récipiendaire joue un rôle explicatif notoire, de même que les caractéristiques de chaque bailleur.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Similar content being viewed by others

Notes

  1. Since Svensson (2000) focuses on rent-seeking activities in recipient countries, bilateral and multilateral aid is pooled. Consequently, the results describe the behaviour of a hypothetical combination of bilateral and multilateral donor.

  2. Similarly, one could argue that the domestic health expenditures of the donor government reflect the importance of health as a topic on the political agenda of the donor country. Thus, we would expect that the domestic health expenditures are correlated with the spending policies for health concerns in recipient countries. We included this indicator in previous estimations. Yet, because of limited data availability, the sample size was reduced to about a quarter (selection stage) and a third (allocation stage) as many observations were dropped. We therefore did not include this indicator in our final model as these coefficients seemed not to be reliable estimates.

  3. For more details please refer to IHME (2009, pp. 68–71).

  4. Personal communication with Joseph Dieleman, PhD, Acting Assistant Professor and lead faculty in the Financial Resource for Health research group at the Institute for Health Metrics and Evaluation, Department of Global Health, University of Washington in November 2014.

  5. The results of our baseline specifications presented in Tables 1 and 2 did not change when we re-estimated the models with the missing values instead of the zeros. Thus, the procedure to replace missing values with zeros for the HIV prevalence rate has no impact on the estimation results.

  6. Coefficient effects must be interpreted with care. The reported coefficients for the selection stage (for example, Table 1) are average marginal effects as probit coefficients have no intuitive interpretation. The marginal effect is the change in the response per one-unit change in the covariate and shows the change in the probability after a marginal increase at the mean of the regressor with all other covariates held at their means (Powers and Xie, 2008).

  7. The outcome variable was log transformed in the estimations for the allocation decision. Coefficients on all independent variables that were log transformed were interpreted as elasticities (a 1 per cent change in the independent variable is associated with a β*1 per cent change in the outcome variable). Coefficients on all independent variables that were not log transformed were interpreted such that a one-unit change in the independent variable is associated with a 100*β*1 per cent change in the outcome variable (Stock and Watson, 2012, p. 314).

  8. We re-estimated our models using logged GDP instead of logged GDP per capita for both donor and recipient countries (results available upon request). As one would expect, the results remained the same except for the coefficients for both donor and recipient population. All else being equal, the recipient’s population size is positively associated with the selection probability and the aid allocation. For a 1 per cent increase in population size, we expect a 0.1 per cent increase (depending on the model) in health assistance (at least P<0.05). A donor’s population size, all else being equal, is negatively and strongly associated with both decision stages. For a 1 per cent decrease in the donor’s population, we expect on average a 2 per cent increase in health aid (P<0.001).

  9. We owe this point to an anonymous referee.

  10. The deviance residuals for the probit estimations could not be calculated because of technical problems.

References

  • Alesina, A. and Dollar, D. (2000) Who gives foreign aid to whom and why? Journal of Economic Growth 5 (1): 33–63.

    Article  Google Scholar 

  • Alesina, A. and Weder, B. (2002) Do corrupt governments receive less foreign aid? American Economic Review 92 (4): 1126–1137.

    Article  Google Scholar 

  • Barbieri, K., Keshk, O. and Pollins, B. (2008) Correlates of war project trade data set codebook, Version 2.01. http://correlatesofwar.org, accessed 18 August 2010.

  • Berthélemy, J.-C. (2006) Bilateral donors’ interest vs. recipients’ development motives in aid allocation: Do all donors behave the same? Review of Development Economics 10 (2): 179–194.

    Article  Google Scholar 

  • Berthélemy, J.-C. and Tichit, A. (2004) Bilateral donors’ aid allocation decisions – A three-dimensional panel analysis. International Review of Economics & Finance 13 (3): 253–274.

    Article  Google Scholar 

  • Burnside, C. and Dollar, D. (2000) Aid, policies, and growth. The American Economic Review 90 (4): 847–868.

    Article  Google Scholar 

  • Byers, J.A. (1997) Great circle distances between capital cities, http://www.chemical-ecology.net/java/capitals.htm, accessed 15 October 2010.

  • Cassen, R. (1994) Does Aid Work?, 2nd edn. Oxford: Oxford University Press.

    Google Scholar 

  • CEPII (2010) Geodesic distances, http://www.cepii.fr/anglaisgraph/bdd/distances.htm, accessed 10 November 2010.

  • Chong, A. and Gradstein, M. (2008) What determines foreign aid? The donors’ perspective. Journal of Development Economics 87 (1): 1–13.

    Article  Google Scholar 

  • CIA (2010) The world factbook, https://www.cia.gov/library/publications/the-world-factbook/, accessed 14 September 2010.

  • Claessens, S., Cassimon, D. and Van Campenhout, B. (2009) Evidence on changes in aid allocation criteria. The World Bank Economic Review 23 (2): 185–208.

    Article  Google Scholar 

  • Clist, P. (2011) 25 years of aid allocation practice: Whither selectivity? World Development 39 (10): 1724–1734.

    Article  Google Scholar 

  • Correlates of War 2 Project (2006) Colonial/dependency contiguity data, 1816–2002. Version 3.0, http://correlatesofwar.org, accessed 13 August 2010.

  • Cragg, J.G. (1971) Some statistical models for limited dependent variables with application to the demand for durable goods. Econometrica 39 (5): 829–844.

    Article  Google Scholar 

  • Dalgaard, C.-J., Hansen, H. and Tarp, F. (2004) On the empirics of foreign aid and growth. Economic Journal 114 (496): F191–F216.

    Article  Google Scholar 

  • Dollar, D. and Levin, V. (2006) The increasing selectivity of foreign aid, 1984–2003. World Development 34 (12): 2034–2046.

    Article  Google Scholar 

  • Dreher, A., Nunnenkamp, P. and Thiele, R. (2008) Does aid for education educate children? Evidence from panel data. The World Bank Economic Review 22 (2): 291–314.

    Article  Google Scholar 

  • Dreher, A., Nunnenkamp, P. and Öhler, H. (2010) Why it Pays for Aid Recipients to Take Note of the Millennium Challenge Corporation: Other Donors Do! Kiel Working Papers (1609), Kiel, Germany: Kiel Institute for the World Economy, pp. 1–22.

  • Dudley, L. and Montmarquette, C. (1976) A model of the supply of bilateral foreign aid. The American Economic Review 66 (1): 132–142.

    Google Scholar 

  • Easterly, W. (2009) Can the West save Africa? Journal of Economic Literature 47 (2): 373–447.

    Article  Google Scholar 

  • Esser, D.E. and Bench, K.K. (2011) Does global health funding respond to recipients’ needs? Comparing public and private donors’ allocations in 2005–2007. World Development 39 (8): 1271–1280.

    Article  Google Scholar 

  • Feeny, S. and McGillivray, M. (2008) What determines bilateral aid allocations? Evidence from time series data. Review of Development Economics 12 (3): 515–529.

    Article  Google Scholar 

  • Fielding, D. (2011) Health aid and governance in developing countries. Health Economics 20 (7): 757–769.

    Article  Google Scholar 

  • Fink, G. and Redaelli, S. (2011) Determinants of international emergency aid – Humanitarian need only? World Development 39 (5): 741–757.

    Article  Google Scholar 

  • Hoeffler, A. and Outram, V. (2011) Need, merit, or self-interest – What determines the allocation of aid? Review of Development Economics 15 (2): 237–250.

    Article  Google Scholar 

  • Hogan, M. et al. (2010) Maternal mortality for 181 countries, 1980–2008: A systematic analysis of progress towards millennium development goal 5. The Lancet 375 (9726): 1609–1623.

    Article  Google Scholar 

  • IHME (2009) Financing Global Health 2009: Tracking Development Assistance for Health. Seattle, WA: Institute for Health Metrics and Evaluation, University of Washington.

  • IHME (2011) Financing Global Health 2011: Continued Growth as MDG Deadline Approaches. Seattle, WA: Institute for Health Metrics and Evaluation, University of Washington.

  • Isopi, A. and Mavrotas, G. (2009) Aid allocation and aid effectiveness: An empirical analysis. In: G. Mavrotas and M. McGillivray (eds.) Development Aid: A Fresh Look. Basingstoke, UK: Palgrave Macmillan, pp. 114–158.

    Chapter  Google Scholar 

  • Kasuga, H. (2007) The Millennium Development Goals and Aid Allocation: Which Donors Give High-Quality Aid? Tokyo, Japan: Research Institute of Economy, Trade and Industry (RIETI), RIETI Discussion Paper Series 08-E-050.

  • Lee, S.A. and Lim, J.-Y. (2014) Does international health aid follow recipients’ needs? Extensive and intensive margins of health aid allocation. World Development 64 (0): 104–120.

    Article  Google Scholar 

  • Lozano, R. et al. (2012) Global and regional mortality from 235 causes of death for 20 age groups in 1990 and 2010: A systematic analysis for the global burden of disease study 2010. The Lancet 380 (9859): 2095–2128.

    Article  Google Scholar 

  • Lu, C., Schneider, M., Gubbins, P., Leach-Kemon, K., Jamison, D. and Murray, C. (2010) Public financing of health in developing countries: A cross-national systematic analysis. The Lancet 375 (9723): 1375–1387.

    Article  Google Scholar 

  • Maizels, A. and Nissanke, M.K. (1984) Motivations for aid to developing countries. World Development 12 (9): 879–900.

    Article  Google Scholar 

  • McGillivray, M. (2003) Modelling aid allocation: Issues, approaches and results. Journal of Economic Development 28 (1): 171–188.

    Google Scholar 

  • Mishra, P. and Newhouse, D. (2009) Does health aid matter? Journal of Health Economics 28 (4): 855–872.

    Article  Google Scholar 

  • Neumayer, E. (2003a) Do human rights matter in bilateral aid allocation? A quantitative analysis of 21 donor countries. Social Science Quarterly 84 (3): 650–666.

    Article  Google Scholar 

  • Neumayer, E. (2003b) The Pattern of Aid Giving. The Impact of Good Governance on Development Assistance. New York: Routledge.

    Book  Google Scholar 

  • Neumayer, E. (2005) Is the allocation of food aid free from donor interest bias? Journal of Development Studies 41 (3): 394–411.

    Article  Google Scholar 

  • Nunnenkamp, P. and Thiele, R. (2006) Targeting aid to the needy and deserving: Nothing but promises? World Economy 29 (9): 1177–1201.

    Article  Google Scholar 

  • OECD (2013) Creditor reporting system, http://stats.oecd.org/Index.aspx?QueryId=33364, accessed 24 June 2013.

  • Peiffer, C.A. and Boussalis, C. (2010) Foreign assistance and the struggle against HIV/AIDS in the developing world. The Journal of Development Studies 46 (3): 556–573.

    Article  Google Scholar 

  • Powell-Jackson, T., Borghi, J., Mueller, D.H., Patouillard, E. and Mills, A. (2006) Countdown to 2015: Tracking donor assistance to maternal, newborn, and child health. The Lancet 368 (9541): 1077–1087.

    Article  Google Scholar 

  • Powers, D.A. and Xie, Y. (2008) Statistical Methods for Categorical Data Analysis, 2nd edn. Bingley, UK: Emerald.

    Google Scholar 

  • PRS Group (2012) International country risk guide. From The PRS Group, http://www.prsgroup.com/ICRG_methodology.aspx, accessed 6 August 2013.

  • Radelet, S. (2006) A Primer on Foreign Aid. Washington DC: Center for Global Development, Working Paper Number 92, pp. 1–24.

  • Rajaratnam, J. et al. (2010) Neonatal, postneonatal, childhood, and under-5 mortality for 187 countries, 1970–2010: A systematic analysis of progress towards millennium development goal 4. The Lancet 375 (9730): 1988–2008.

    Article  Google Scholar 

  • Ravishankar, N. et al. (2009) Financing of global health: Tracking development assistance for health from 1990 to 2007. The Lancet 373 (9681): 2113–2124.

    Article  Google Scholar 

  • Round, J.I. and Odedokun, M. (2004) Aid effort and its determinants. International Review of Economics & Finance 13 (3): 293–309.

    Article  Google Scholar 

  • Shiffman, J. (2008) Has donor prioritization of HIV/AIDS displaced aid for other health issues? Health Policy and Planning 23 (2): 95–100.

    Article  Google Scholar 

  • StataCorp (2013) Stata Statistical Software: Release 13. College Station, TX: StataCorp LP.

  • Stock, J.H. and Watson, M.W. (2012) Introduction to Econometrics, 3rd edn. Boston, MA: Pearson Addison Wesley.

    Google Scholar 

  • Svensson, J. (2000) Foreign aid and rent-seeking. Journal of International Economics 51 (2): 437–461.

    Article  Google Scholar 

  • Tarp, F., Bach, C.F., Hansen, H. and Baunsgaard, S. (1999) Danish aid policy: Theory and empirical evidence. In: K.L. Gupty (ed.) Foreign Aid: New Perspectives. Boston: Kluwer Academic Publishers, pp. 149–169.

  • Thiele, R., Nunnenkamp, P. and Dreher, A. (2007) Do donors target aid in line with the millennium development goals? A sector perspective of aid allocation. Review of World Economics 143 (4): 596–630.

    Article  Google Scholar 

  • UN Statistics Division (2010) Demographic yearbook, http://unstats.un.org/unsd/demographic/products/dyb/dyb2.htm, accessed 29 October 2010.

  • Wang, H. et al. (2012) Age-specific and sex-specific mortality in 187 countries, 1970–2010: A systematic analysis for the global burden of disease study 2010. The Lancet 380 (9859): 2071–2094.

    Article  Google Scholar 

  • White, H. and McGillivray, M. (1995) How well is aid allocated? Descriptive measures of aid allocation: A survey of methodology and results. Development and Change 26 (1): 163–183.

    Article  Google Scholar 

  • WHO (1978) Declaration of Alma-Ata. Geneva, Switzerland: World Health Organization (WHO).

  • WHO (2010) World Health Statistics 2010. Indicator Compendium. Interim version Geneva, Switzerland: World Health Organization (WHO).

  • Williamson, C.R. (2008) Foreign aid and human development: The impact of foreign aid to the health sector. Southern Economic Journal 75 (1): 188–207.

    Google Scholar 

  • World Bank (2010) World development indicators, http://data.worldbank.org/indicator, accessed 22 October 2010.

  • Younas, J. (2008) Motivation for bilateral aid allocation: Altruism or trade benefits. European Journal of Political Economy 24 (3): 661–674.

    Article  Google Scholar 

Download references

Acknowledgements

I would like to thank Ingo Bordon, Max Buege, Matthias Dauner, Joseph Dieleman, Nora El Bialy, Jerg Gutmann, Bernd Hayo, Sang-Min Park, Birgit Schmitz, Stefan Voigt, Juliane Weimann, Uli Zierahn and two anonymous referees for their comments and suggestions, which helped improve both the quality of the research and its presentation. This work was supported by Collegio Carlo Alberto, University of Torino, Moncalieri, Italy and Marburg University Research Academy, Philipps-University Marburg, Marburg, Germany. The editorial support by the German Development Institute/Deutsches Institut für Entwicklungspolitik (DIE), Bonn, Germany, is gratefully acknowledged.

Author information

Authors and Affiliations

  1. Department of Economics, Philipps-University Marburg, Marburg, Germany

    Katharina M K Stepping

  2. Collegio Carlo Alberto, University of Torino, Moncalieri, Italy

    Katharina M K Stepping

Authors
  1. Katharina M K Stepping
    View author publications

    You can also search for this author in PubMed Google Scholar

Appendices

Appendix A

Table A1

Table A1 Overview of the sample of recipients
Full size table

Appendix B

Figure B1

Figure B1
figure 1

Allocation decisions per decade, region and income group, 1990–2007.

Source: IHME (2009).

Full size image

Figure B2

Figure B2
figure 2

Allocation decisions per region and income group, 1990–2007.

Source: IHME (2009).

Full size image

Appendix C

Table C1

Table C1 Definition and sources of variables in all main models
Full size table

Table C2

Table C2 Descriptive statistics
Full size table

Table C3

Table C3 Correlation matrix for variables included in all main models
Full size table

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Stepping, K. Do Health Conditions Determine the Flow of External Health Resources? Evidence from Panel Data. Eur J Dev Res 28, 270–293 (2016). https://doi.org/10.1057/ejdr.2014.75

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/ejdr.2014.75

Keywords

Search

Navigation