Efficiency Analysis of Official Development Assistance Provided by Korea

Abstract

Results of the CDI and QODA evaluation developed by OECD showed that Korea's aid presented low efficiency compared to other aid countries. However, these methods represent a qualitative assessment of the effectiveness of each country's aid and are not applicable to the evaluation of actual aid projects and the identification of causes of the inefficiency. Therefore, it is needed to grasp the reality of Korea's aid and to identify the cause of aid inefficiency to set up a better ODA policy. The purpose of this study is to improve the effectiveness of Korea's Official Development Assistance (ODA) provided to developing countries. To do this, we analyzed the efficiency of ODA provided to 33 recipient countries by Korea through data envelopment analysis method. The effects of three factors, illiteracy, integrity, and GDP, on efficiency were also investigated by utilizing a Tobit regression analysis. As a result of the DEA efficiency analysis, it was found that the average efficiency was about 65.74%. By region, the average efficiency scores of Asia, Africa, Central and South America, and Middle East and Eastern Europe were about 47.8%, 78.9%, 70.4%, and 62.7%, respectively. This indicates that Asian countries are inefficient compared to countries from other regions. It was also found that GDP, integrity, and illiteracy have positive effects on efficiency. The methodology proposed in this study can be used for other studies to create an aid policy that produces efficient results.