Does Foreign Aid Target the Poorest?

Abstract

This paper examines the extent to which foreign aid reaches people at different levels of wealth in Africa. I use household surveys to measure the sub-national distribution of a country’s population by levels of wealth and match this information to data on the location of aid projects from two multilateral donors. Within countries, aid disproportionately flows to regions with more of the richest people. Aid does not favor areas with more of the poorest people. These findings violate the stated preferences of the multilateral donors under study, suggesting that the donors either cannot or are not willing to exercise control over the location of aid projects within countries. The results also suggest that aid is not being allocated effectively to alleviate extreme poverty.

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