Allocation of Aid Between and Within Recipients: A Political Economic Approach

Abstract

One reason for giving foreign aid to a recipient country is the benefit of the poor in that country.¹ However, it is well established that it is very difficult for donor countries to enforce that aid reaches intented targets, and foreign aid is highly fungible (see [3], [7], [13], [24] ). This is rather surprising given that the total amount of aid that a donor country gives out is limited and there is strong competition from developing countries for access to this limited fund.² One would expect that recipient countries would set their house in order to receive a greater amount of aid.