Aid for Trade and bilateral trade relations: evidence from a network approach

Purpose Aid for Trade (AfT) is a major international initiative designed to strengthen the trade capacity and export performance of developing countries. This paper asks whether AfT strengthens bilateral trade relationships between specific donors and recipients, or whether its trade-generating effects are primarily diffuse, benefiting recipient exports to third-country markets rather than to donors themselves. Design/methodology/approach This paper examines the effect of AfT on bilateral trade relationships using the Additive and Multiplicative Effects (AME) network model applied to a directed network of 29 Organisation for Economic Co-operation and Development donor countries and 150 recipient countries across the full AfT period, 2004–2021. Findings We find that the posterior mean coefficients for AfT sent range from 0.159 to 0.291 and those for AfT received range from 0.109 to 0.249. Coefficients are stable across the period, with a dip in 2009 consistent with the effects of the global financial crisis. Empirical network analysis reveals persistent structural asymmetry in bilateral trade flows, with weighted reciprocity of 0.64–0.73, indicating that 36% of trade volume is not matched by a counter flow. Global transitivity is also positive and statistically significant but declines over time. The estimated elasticity implies a descriptive scaling of roughly 11–22 dollars of bilateral trade per dollar of AfT. Originality/value Standard gravity model analyses have produced mixed evidence and cannot capture structural network properties and core–periphery organization that characterize the world trade network. This paper addresses that gap as the first comprehensive analysis of bilateral trade for both donor-to-recipient and recipient-to-donor flows, using a fully directed network analysis.