Does South Korea’s ODA Enhance Economical and Human Development in CLMV? Comparing Panel Fixed Effect Regression and ARDL Models

Purpose - This paper empirically analyzes the effect of South Korea’s Official Development Assistance (ODA) on the economic growth and human capital formation of CLMV nations from the recipient’s perspective. The study estimates the effects of South Korea’s ODA on economic outcomes and explores the dynamic relationships among selected independent variables. Design/Methodology - Our empirical model considers economic growth and human capital to be key outcomes of South Korea’s ODA. Physical capital formation and foreign direct investment (FDI) are considered explanatory variables from the recipient perspective. This study employs panel fixed-effect regression to examine changes in the effects of South Korea’s ODA while accounting for specific control variables. In addition, we conducted an Autoregressive Distributed Lag model to probe the dynamic relationships among ODA, capital formation, human capital, and foreign direct investment. Findings - The main findings can be summarized as follows. South Korea’s ODA positively influences both economic growth and human capital formation in CLMV nations. This confirms that South Korea’s ODA model aligns with the interests of recipient nations, particularly in benefiting low-income countries. The positive role of capital formation in human capital development and economic growth was also confirmed. Originality/value - Existing studies mainly focused on South Korea’s ODA from the donor’s perspective, and rarely concentrated on specific recipient nations. This study is also distinctive in its utilization of both panel fixed estimation methods and the Autoregressive Distributed Lag (ARDL) method, providing a comprehensive understanding of the role played by South Korea’s ODA in the specified regions.