A delicate balancing act for aid effectiveness in small Island developing states: Performance-based selectivity or vulnerability-based allocation?

This paper examines the effectiveness of aid allocation by considering (a) policy and institutions as the traditional criteria for aid allocation and (b) the level of vulnerability as a new paradigm, focusing on 35 selected small island developing States over the period 2002−2020. Using the generalized method of moments, the findings show that vulnerability-based allocation is the most relevant criterion for aid allocation. They indicate that regional cooperation can be a path to “raise the voice” of Pacific small island developing States to rethink the aid allocation mechanism in favour of a vulnerability-based allocation.