Sectoral Aid-for-Trade and Sectoral Exports: A Seemingly Unrelated Regression Analysis

This paper examines the relation between foreign aid that is targeted for export promotion of specific sectors in developing countries and sector specific exports of those countries. Three major sectors are studied - agriculture, manufacturing, and service. A major component of this study is the compilation of sector-wise disaagregated aid-for trade (AfT) measures for both committed aid and disbursed aid based on aid data and guidelines from OECD's Creditor Reporting System Our response variable is sectoral exports and primary covariate is sectoral-AfT or SAfT, and since exports in one sector can be correlated with exports in other sectors within a country. a seemingly unrelated regression (SUR) framework is used to capture the interdependence among various sectors in an explicit way, producing efficient estimates. This study analyzes annual export level data of 121 AfT-recipient countries over a period of sixteen years (1995-2010) in the case of commitment aid data and over a period of nine years (2002-2010) in the case of disbursement aid data. The results show that the regression estimates corresponding to sectoral-AfT are positive and statistically significant for all sectors.