Who's Afraid of Foreign Aid? The Donors' Perspective

37 Pages Posted: 14 Nov 2006

See all articles by Alberto Chong

Alberto Chong

University of Ottawa

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); World Bank - Development Research Group (DECRG)

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Date Written: October 2006

Abstract

With efforts across the industrial countries to increase the amount of foreign aid mounting, it is important to understand its determinants. This paper examines the factors affecting the support for foreign aid among voters in donor countries. A simple theoretical model, which considers an endogenous determination of official and private aid flows, relates individual income to aid support through the elasticity of substitution and also suggests that government efficiency is an important factor in this regard. The empirical analysis of individual attitudes, based on the World Values Surveys, reveals that satisfaction with own government performance and individual relative income are positively related to the willingness to provide foreign aid. Furthermore, when using donor country data we find that aid is adversely affected by government inefficiency and income inequality.

Keywords: foreign aid, donors, perceptions, development, corruption

JEL Classification: O10, H41

Suggested Citation

Chong, Alberto and Gradstein, Mark, Who's Afraid of Foreign Aid? The Donors' Perspective (October 2006). CESifo Working Paper Series No. 1833, Available at SSRN: https://ssrn.com/abstract=944422 or http://dx.doi.org/10.2139/ssrn.944422

Alberto Chong

University of Ottawa ( email )

2292 Edwin Crescent
Ottawa, Ontario K2C 1H7
Canada

Mark Gradstein (Contact Author)

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
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+97 2 8647 2941 (Fax)

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