Grants to Needy Countries? A Study of Aid Composition between 1975 and 2005

This article discusses whether the poorest and most indebted countries receive aid in the form of grants rather than loans, by studying bilateral aid flows to low‐ and middle‐income countries between 1975 and 2005. The empirical analysis finds no evidence that more indebted countries receive a higher grant component, but it does show that poorer countries receive a significantly higher grant component, although the size of the effect is quite limited.