Assessing the Allocation of Italian Foreign Aid

This paper provides an assessment of Italian aid policy during the period 1983-2006. In comparison with other donors (DAC and G-7), the main stylized facts are: persistently lower aid/GDP ratio, greater recourse to multilateral channels, a higher percentage of i?½tiedi?½ flows and relatively greater recourse to debt relief. Drawing on the empirical literature on aid allocation, we estimate the determinants of Italyi?½s bilateral aid. We use three groups of explanatory variables, reflecting national-interest, humanitarian and selectivity-related motivations. We find that the distribution of Italian bilateral resources is significantly affected by both national-interest (like foreign policy or trade) and humanitarian motives, related to recipientsi?½ needs; the latteri?½s role, in particular, seems to have strengthened over time. There is ample room for improving selectivity, i.e., the capacity to direct ODA flows to i?½deservingi?½ countries, where better policies and institutions are likely to increase aid effectiveness.