Aid for Trade, government effectiveness and poverty in developing countries: a quantile regression analysis

Purpose – This study aims to assess the effect of Aid for Trade (AfT) inflows on poverty in 60 developing countries and whether this effect depends on the effectiveness of these recipient countries’ governments in better allocating these inflows. Design/methodology/approach – The analysis has applied the quantile regression (QR) approach on an unbalanced panel data set of 60 developing countries over the period 2009–2018. Findings – The findings showed a positive and significant overall correlation between AfT and poverty. This favourable effect, however, only applies to the non-least developed countries (LDCs). However, under a more effective governance environment, the aggregate AfT inflows appeared to reduce poverty levels for the full sample of countries, particularly for the LDCs. Originality/value – This study is considered the initial empirical investigation of the relationship between AfT and poverty using the QR approach, and whether this relationship depends on the government effectiveness of these nations. The QR approach enables determining if this effect is more significant in recipient nations with higher rates of poverty (LDCs) than in recipient nations with lower rates of poverty (non-LDCs).

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