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

Sung Jin Kang, Hongshik Lee, Bokyeong Park

Research output: Contribution to journalArticlepeer-review

21 Citations (Scopus)

Abstract

Korea, an emerging donor country, largely 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 the FDI gravity model and panel dynamic system GMM estimation shows that only aids from Korea and Japan create more inflow of FDI into their respective recipient developing countries. Those are contrasted with other donors' aids, which are not related to FDI or the substitute for FDI.

Original languageEnglish
Pages (from-to)19-27
Number of pages9
JournalJapan and the World Economy
Volume23
Issue number1
DOIs
Publication statusPublished - 2011 Jan

Keywords

  • Aid allocation
  • Foreign aid
  • Foreign direct investment (FDI)
  • Japan
  • Korea

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

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