Recently, there were several studies contributed to foreign aid and growth literature by assessing the impact of
different categories of foreign aid and growth (Ouattara and Strobl 2008;Mavrotas 2005; Mavrotas 2002a). They
disaggregated foreign aid into different categories and found different category of foreign aid affected growth
differently.These findings spur a question whether income inequality will have the same significant impact when
aid is evaluated at disaggregated level. Does different sectoral foreign aid have significant impact on income
inequality on the recipient countries? If yes, which sector of aid reduced income inequality? Thus, the objective
of this study is to analyze the impact of sectoral foreign aid on income inequality in aid recipient countries.