PUBLICATIONS & REPORTS

Contents Introduction

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.