By the Numbers: U.S. Development Assistance

I've recently been digging into U.S. development assistance figures trying to get a feel for the U.S. aid strategy in the Asia-Pacific region. While I'm still trying to make sense of some of the trends, I've come across a number of interesting tidbits in the course of my research, which I thought I'd share.

1) A weak correlation between 'need' and aid

The correlation between U.S. aid per capita and a country's GDP per capita is fairly weak. Variation in GDP per capita only explains roughly 11 per cent of the variation in U.S. aid per capita.

2) The presence of outliers

There are some significant outliers in the data. I was particularly surprised at the extent to which the U.S. provides large disbursements to small island nations in the Pacific Ocean. Between 2006 and 2012, the U.S. distributed an average of $106 per capita in the Marshall Islands, $94 per capita in the Federated States of Micronesia (FSM), and $88 per capita in Palau, accounting for an average of 35.2 per cent, 35.4 per cent, and 8.6 per cent of each country's GDP.

Curious about why the U.S. provides such a disproportionate amount of aid to these nations, I did a little digging. Unbeknownst to me, all three have compacts of free association with the United States. Essentially,  each of these states has agreed to allow the United States to operate armed forces in their territory in return for access to U.S. programs and financial assistance.

Including these nations in the above chart has a dramatic effect on the observed relationship between GDP per capita and U.S. aid per capita--it turns a negative correlation into a positive one! However, given the unique arrangement between the U.S. and these countries, I've excluded them from the graph above.

3) Dramatic changes in the Middle East

Regionally speaking, the most dramatic change in recent years has been the decline in aid to the Middle East, which has fallen from $11.8 billion in 2005 to $2 billion in 2012. The change is largely explained by the drop off in aid to Iraq. Funding in most other Middle Eastern countries has remained stable. Aid to Africa and South and Central Asia, meanwhile, has been on the rise, though the latter trend is largely due to increased aid for Afghanistan in recent years.