The Spatial Econometric Analysis on Democracy and Economic Determinants of Official Development Assistance: Evidence from Korea

This study analyzes the determinants affecting Korea’s official development assistance (ODA) to recipient countries using spatial econometric models, unlike most studies. We tested whether the recipient country’s democracy level or political stability, the distance between Korea and the recipient country, trade, GDP, world ODA, and world FDI have an impact on the determinants of Korea’s ODA to recipient countries. The empirical results revealed that Korea’s ODA is impacted by spatial dependence effects. The spatial empirical models showed that while the democracy level of recipient countries, distance, recipient country’s GDP, and world ODA seem to positively influence Korea’s ODA, Korea’s trade does not affect its ODA to recipient countries. The distance between countries is not inversely related to ODA, unlike the trade gravity models. The spatial error-correction estimation with combined spatial effects also shows both spatial effects in the short run. Thus, the country needs to consider the spatial effects of the determinants of ODA to create more effective ODA policies.