Aid and its impact on the donor’s export industry – The Dutch case

Abstract

This paper models the link between Dutch development aid and Dutch exports to 142 recipient countries over the period from 1964 to 2011. Given that Dutch aid policy drastically changed in 1999, the model is estimated separately for the 1964-1999 and the 2000-2011 periods. Dynamic gravity models applied to aggregate exports are estimated controlling for the reverse causality of aid. The findings indicate that there is a positive and significant long-run impact of Dutch bilateral aid on Dutch exports which is mainly driven by the effect in the first period of analysis. The return to aid ranges from $0.26 to $0.40 for each 1$ of aid disbursed, primarily in the 1964-1999 period. The return to aid is not statistically significant in the 2000 to 2011 period, in which only 33 countries with a bilateral development relationship with the Netherlands (15 countries after 2010) continued to receive substantial amounts of aid.