Who Gives Foreign Aid to Whom and Why?

47 Pages Posted: 5 Apr 2003 Last revised: 10 Oct 2010

See all articles by Alberto F. Alesina

Alberto F. Alesina

Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

David Dollar

World Bank - Development Economics Group (DEC)

Date Written: June 1998

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 by political and strategic considerations, much more than by the economic needs and policy performance of the recipients. Colonial past and political alliances are the major determinants of foreign aid. At the margin, however, countries that democratize receive more aid, ceteris paribus. While foreign aid flows respond more to political variables, foreign direct investments are more sensitive to economic incentives, particularly property rights in the receiving countries. We also uncover significant differences in the behavior of different donors.

Suggested Citation

Alesina, Alberto F. and Dollar, David, Who Gives Foreign Aid to Whom and Why? (June 1998). NBER Working Paper No. w6612. Available at SSRN: https://ssrn.com/abstract=226334

Alberto F. Alesina (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-8388 (Phone)
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Centre for Economic Policy Research (CEPR)

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United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David Dollar

World Bank - Development Economics Group (DEC) ( email )

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Washington, DC 20433
United States

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