A structural analysis of foreign aid to ten Mediterranean countries

Although the literature on aid effectiveness is vast, most of it is based on cross-country studies and does not address the Mediterranean countries as a especial group. To fill this gap, this paper describes the main structural characteristics of overseas development assistance (ODA). ODA is analyzed by country, by donor, and by sector for 1960-2007 in ten Mediterranean countries. Different patterns among recipient countries are found, but a proliferation and concentration of donors is confirmed. A positive correlation between shocks in GDP and ODA is found when the whole sample of countries is analyzed, but when the Mediterranean economies are individually considered, the pro-cyclicality of the ODA is not confirmed, except in the case of Lebanon. FDI, remittances and ODA flows are compared. The three variables are positively correlated. ODA and remittances are indeed less volatile than FDI flows. But, whereas remittances are stable and strategic to Egypt, Lebanon and Turkey, ODA flows to Syria and the Palestinian territories are higher than remittances in volume, but more volatile. Egypt and Turkey are the main destinations of FDI to the region. Finally, it is shown that ODA does not offset the shocks of FDI or remittances.