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Who Gives Foreign Aid to Whom and Why?

Who Gives Foreign Aid to Whom and Why? This paper studies the pattern of allocation of foreign aid from various donors to receiving countries. We find considerable evidence that the direction of foreign aid is dictated as much by political and strategic considerations, as by the economic needs and policy performance of the recipients. Colonial past and political alliances are major determinants of foreign aid. At the margin, however, countries that democratize receive more aid, ceteris paribus. While foreign aid flows respond to political variables, foreign direct investments are more sensitive to economic incentives, particularly “good policies” and protection of property rights in the receiving countries. We also uncover significant differences in the behavior of different donors. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Growth Springer Journals

Who Gives Foreign Aid to Whom and Why?

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References (22)

Publisher
Springer Journals
Copyright
Copyright © 2000 by Kluwer Academic Publishers
Subject
Economics; Economic Growth; Macroeconomics/Monetary Economics//Financial Economics; International Economics
ISSN
1381-4338
eISSN
1573-7020
DOI
10.1023/A:1009874203400
Publisher site
See Article on Publisher Site

Abstract

This paper studies the pattern of allocation of foreign aid from various donors to receiving countries. We find considerable evidence that the direction of foreign aid is dictated as much by political and strategic considerations, as by the economic needs and policy performance of the recipients. Colonial past and political alliances are major determinants of foreign aid. At the margin, however, countries that democratize receive more aid, ceteris paribus. While foreign aid flows respond to political variables, foreign direct investments are more sensitive to economic incentives, particularly “good policies” and protection of property rights in the receiving countries. We also uncover significant differences in the behavior of different donors.

Journal

Journal of Economic GrowthSpringer Journals

Published: Oct 6, 2004

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