Grouping foreign aid and the Multidimensional Poverty Index: a cluster analysis

Abstract

The paper deals with the effects of foreign aid on the changes in the Multidimensional Poverty Index over time. The goal is to group data on foreign aid (considered under a variety of measures and instruments), the MPI and changes on their headcount and their intensity components, and public expenditure on education and health, for a sample of 60 observations (50 countries) and the period 1999-2014. As information is only available as a cross-country section, the methodology used is a three steps cluster and discriminant analysis. In the first step, the cluster was carried out with six different sectorial foreign aid, closely linked to the ten MPI indicators. In a second step, the clusters were performed among the changes in the ten MPI indicators. In the third step, aid, MPI indicators and public expenditures on education and health were considered. The main results are three groups of countries in each step. Only few countries remain always in the same group. Although there is a remarkable heterogeneity across countries and groups among the aid types allocated on them, all countries belonging to the second group received a significant amount of aid.

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