Searching for the Various Effects of Subprograms in Official Development Assistance on Human Development across 15 Asian Countries: Panel Regression and Fuzzy Set Approaches

Previous studies are limited in identifying the effectiveness of each country to seek sectoral support rather than integrated aid. However, it is hypothesized that sector-specific aid by Official Development Assistance (ODA) may be more effective than total aid. This study aims to identify the determinants of economic growth and the living standard levels in 15 Asian countries, focusing particularly on the effects of Official Development Assistance (ODA). In order to explore this research question, we have used two indexes: (1) the annual ODA grants to Korea, with aid type as the key independent variable; and (2) the human development index (HDI), to measure dependent variables from 2006 to 2016, across the 15 Asian countries. Special attention has been paid to understand which is more significant on human development, the effects of each type of aid program individually, and the whole amount of ODA assistance. We have constructed a panel model and a fuzzy set ideal type model to account in the data for qualitative attributes by recipient countries. We have found that the economic and social impacts of ODA on the basis of panel data are significant and that our instrumental variable (IV) method illustrates a statistically significant impact of the total ODA on the HDI of the recipient countries. By separating the total amount of ODA into economic and social sectors, we have found that specific programs of public service, medical care, and welfare are more likely to directly affect HDI. While the total amount of ODA still has a positive impact on HDI, education, health, and the public service field, aids also have significant effects on HDI. Although the effect of sector-specific aid in the water and sanitation field grant-aid is not significant in panel regression results, our fuzzy set method shows that, even if education aid is low, HDI is estimated to increase if the level of health and public service aid is high. Our empirical findings suggest that (1) sector-specific aid may be more effective than total aid with ineffective sub-aid programs and that (2) an optimally specific combination of various sub-programs in ODA may exist for each developing country.