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

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  • Kang, Sung Jin
  • Lee, Hongshik
  • Park, Bokyeong

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.

Suggested Citation

  • Kang, Sung Jin & Lee, Hongshik & Park, Bokyeong, 2011. "Does Korea follow Japan in foreign aid? Relationships between aid and foreign investment," Japan and the World Economy, Elsevier, vol. 23(1), pages 19-27, January.
    • Handle: RePEc:eee:japwor:v:23:y:2011:i:1:p:19-27
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Emerging Partners: Anything but ‘Rogue Aid’
      by Shifting Wealth in ShiftingWealth on 2011-05-03 20:17:00

    Citations

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    4. Bokyeong Park & Hongshik Lee, 2015. "Motivations for Bilateral Aid Allocation in Korea: Humanitarian, Commercial, or Diplomatic?," Asian Economic Papers, MIT Press, vol. 14(1), pages 180-197, Winter/Sp.
    5. Liao, Hongwei & Chi, Yedi & Zhang, Jiarui, 2020. "Impact of international development aid on FDI along the Belt and Road," China Economic Review, Elsevier, vol. 61(C).
    6. Van Der Sluis, E. & Durowah, O., 2018. "Aid for Trade and Foreign Direct Investment: Effects on Poverty Reduction," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277307, International Association of Agricultural Economists.
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    10. Yasuyuki Sawada, 2014. "Japan's Strategy for Economic Cooperation with Asian Countries," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 10(1), pages 53-76, March.
    11. Sung-Mi Kim, 2017. "International Perceptions of South Korea as Development Partner: Attractions and Strategic Implications," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 29(5), pages 1086-1101, November.
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