Searching for a New Dimension of ODA: Goal Diversity and Trade Revisited

Abstract

The effects of official development assistance (ODA) have been much discussed since the late 1950s, resulting in conflicting arguments. To tackle this issue, this paper examines the diversity of the roles and goals of ODA. The ODA paradigm has evolved from an economic view (1950s-60s), poverty reduction (1960s-70s) and social development (1970s-90s) to sustainable development (1990s-2000s). This paper focuses on examining the effects of ODA in terms of changing goals at different times. To do so, a panel data analysis was conducted for countries receiving ODA and categorized by the OECD DAC from 1960 to 2011(sometimes 1980-2011). The results of analysis show that the diverse effects of ODA on developing countries vary depending on the political (e.g., national transparency) or economic (e.g., income level) conditions of individual countries. For example, ODA is effective for certain countries in poverty reduction (as explained by the integrated development model), while for others, it is more effective in economic growth. Interestingly, national transparency and income level moderate ODA effectiveness and sometimes change the roles and goals of ODA. Furthermore, strategic ODA implementation is expected to enable developing countries to move toward sustainable national development, and make the concept of ownership and ODA for trade more important. Trade can be a powerful engine for growth and development in ODA recipient countries. ODA for trade, accordingly, is expected to help recipient countries use trade more effectively to promote growth and poverty reduction as well as achieve their development objectives. To this end, they need to get ownership from donor countries. To build up ownership, donors need to give ODA to countries with conditions that require improving national transparency or good governance.