Do Philanthropic Citizens Behave Like Governments? Internet-Based Platforms and the Diffusion of International Private Aid
35 Pages Posted: 22 Oct 2009
Date Written: October 1, 2009
Until recently, most aid from rich to poor countries was transmitted through official bilateral and multilateral channels. But the rapid growth in private development aid from foundations, charities, and philanthropic individuals raises a host of questions regarding the allocation of aid and its selectivity across recipient countries. We analyze determinants of the supply of private aid from two large internet-based non-profit organizations that bundle contributions from individuals and transfer them as grants or loans to developing countries: GlobalGiving and Kiva. We compare the allocation of funds from these organizations to official development assistance. We find that the selectivity of private aid is less oriented toward country-specific factors, and more toward frontline projects and individuals in developing nations. Survival analysis examining the funding rate of projects on these two Web sites confirms the lower relevance of country-specific characteristics and risks, suggesting that philanthropic individuals behave unlike official aid donors. This indicates that private aid and official aid are complementary: official aid supports countries, private aid supports people. With different preferences, formal coordination between these different donors may not be needed. Instead, each needs to understand when and how it can partner with the other to meet differing objectives.
Keywords: philanthropy, foreign aid, development, global poverty, global economics
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