Journal of Economic Growth

, Volume 5, Issue 1, pp 33–63 | Cite as

Who Gives Foreign Aid to Whom and Why?

  • Alberto Alesina
  • David Dollar


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.

foreign aid economic development political economy democracy 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Ball, R., and C. Jonson. (1996). “Political, Economic and Humanitarian Motivations for PL 480 Food Aid: Evidence from Africa,” Economic Development and Cultural Change 44 (April), 515-547.Google Scholar
  2. Barro, R. (1996). “Democracy and Growth,” Journal of Economic Growth 1, 1-27.Google Scholar
  3. Boone, P. (1994). “The Impact of Foreign Aid on Savings and Growth.” Mimeo, London School of Economics.Google Scholar
  4. Boone, P. (1996). “Politics and the Effectiveness of Foreign Aid,” European Economic Review 40, 289-329.Google Scholar
  5. Burnside, C., and D. Dollar. (forthcoming). “Aid, Policies, and Growth,” American Economic Review.Google Scholar
  6. Central Intelligence Agency. (1996). The World Factbook. Brassey's.Google Scholar
  7. Collier, P., and D. Dollar. (1998). “Aid Allocation and Poverty Reduction.” Policy ResearchWorking Paper 2041. The World Bank. Washington, DC.Google Scholar
  8. Frey, B., and F. Schneider. (1986). “Competing Models of International Lending Activities,” Journal of Development Economics, 225-245.Google Scholar
  9. Gastil, R. D. (1990). “The Comparison Survey of Freedom,” Studies in Comparative International Development 25(1), 25-50.Google Scholar
  10. Gastil, R. D. Freedom in the World: Political Rights and Civil Liberties, 1986–87. Greenwood Press.Google Scholar
  11. Greene, W. (1993). Econometric Analysis. Prentice Hall.Google Scholar
  12. Inter-University Consortium for Political and Social Research. (1982). U.N. Roll Call Data, 1946-1985 [computer file]. Ann Arbor, MI.Google Scholar
  13. Jepma, C. (1997). “On the Effectiveness of Development Aid.” World Bank, unpublished.Google Scholar
  14. Ludborg, P. (1998). “Foreign Aid and International Support as a Gift Exchange.” Economics and Politics 10(July), 127-141.Google Scholar
  15. Lumsdaine, D. H. (1997). Moral Vision in International Politics. Princeton, NJ: Princeton University Press.Google Scholar
  16. McKinley, R. D., and R. Little. (1978). “The French Aid Relationship,” Development and Change, 459-478.Google Scholar
  17. McKinley, R. D., and R. Little. (1979). “The U.S. Aid Relationship: A Test of the Recipient Need and Donor Interest Models,” Political Studies 27(2), 236-250.Google Scholar
  18. Maizels, A., and M. Nissanke. (1984). “Motivations for Aid to Developing Countries,” World Development, 879-900.Google Scholar
  19. OECD. (1996). Geographical Distribution of Financial Flows to Aid Recipients: 1960–95 (CD-Rom): OECD.Google Scholar
  20. Political Risk Services. (Various years). International Country Risk Guide.Google Scholar
  21. Sachs, J. D., and A. Warner. (1995). “Economic Reform and the Process of Global Integration,” Brookings Papers on Economic Activity 1, 1-118.Google Scholar
  22. Schraeder, P., S. Hook, and B. Taylor. (1998). “Clarifying the Foreign Aid Puzzle: A Comparison of American, Japanese, French and Swedish Aid Flows,” World Politics, 294-320.Google Scholar
  23. Summers, R., and A. Heston. (1988). “A New Set of International Comparisons of Real Products and Price Level Estimates for 130 Countries, 1950–1985,” Review of Income and Wealth 34, 1-25 (updated to 1992).Google Scholar
  24. Trumbull, W., and H. Wall. (1994). “Estimating Aid-Allocation Criteria with Panel Data,” The Economic Journal, 876-892.Google Scholar
  25. World Bank. (Various years). World Debt Tables. Baltimore, MD: Johns Hopkins University Press.Google Scholar
  26. World Bank. (1998). Assessing Aid. New York: Oxford University Press.Google Scholar

Copyright information

© Kluwer Academic Publishers 2000

Authors and Affiliations

  • Alberto Alesina
    • 1
    • 2
  • David Dollar
    • 3
  1. 1.Department of EconomicsHarvard UniversityCambridge
  2. 2.NBER and CEPRUSA
  3. 3.The World BankWashington

Personalised recommendations