The 2018 Nordic Conference on Development Economics

Felipe Starosta de Waldemar attended the 2018 Nordic Conference on Development Economics, on June 11th and 12th, in Helsinki, Finland. He presented his paper “Donor National Interests or Recipient Needs? Evidence from EU Multinational Tender Procedures on Foreign Aid”.

Official development assistance provided bilaterally by donor countries combines both altruistic motives and self-interest. This paper explores whether these traditional determinants of bilateral foreign aid also have an impact on the allocation of projects centrally administered by the European Union through a public procurement process. We examine whether companies from a specific country systematically obtain more projects in recipient countries in which its country has more commercial and historical ties, controlling for recipient needs and other potential determinants. We use data from the European Union for the period 2010 to 2014, and we build bilateral measures of the total amount of aid obtained by enterprises from countries belonging to the OECD’s Development Assistance Committee. These projects are financed by either the European Commission budget or the 10th European Development Fund through tender procedures. We show that bilateral exports and common language significantly increase the value of multilateral projects, while recipients’ needs have a weak effect. These results are robust to different estimation methods and other possible determinants of foreign aid. We do not find heterogeneous effects concerning different groups of countries. Companies from countries with commercial and language connections with recipient nations consistently secure more projects in these regions.

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