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Does Korea follow Japan in foreign aid? : Relationships between aid and foreign investment

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  • Does Korea follow Japan in foreign aid?
  • Park, Bokyeong; Lee, Hong Sik
  • The International Centre for the Study of East Asian Development


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Title Does Korea follow Japan in foreign aid?
Similar Titles
Sub Title

Relationships between aid and foreign investment

Material Type Reports
Author(English)

Park, Bokyeong; Lee, Hong Sik

Publisher

Kitakyushu:The International Centre for the Study of East Asian Development

Date 2008-04
Series Title; No Working Paper Series / 2008-08
Subject Country Japan(Asia and Pacific)
South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Official Aid < Development Assistance
Holding AGI

Abstract

Korea, an emerging donor country, highly considers its economic relations to recipients when allocating its aid. Such practices were preceded by Japan before the 1990s. We expect those similar practices between the two countries will make resemblance in aid outcomes. On a macro level we show similarities in aid allocations by type, region, income, and sector. The similarities are ascertained also at a micro level by our statistical analysis on the relationships between aid and FDI. The analysis based on FDI gravity model and panel dynamic system GMM estimation shows that only aids from Korea and Japan create more inflow of FDI to their recipient developing countries. Those contrast with other donors’ aids which are not related to FDI or substitute for FDI.