The politics of foreign aid

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The politics of foreign aid

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Title: The politics of foreign aid
Author: Mayer, Wolfgang; Raimondos-Møller, Pascalis
Abstract: Why do donor countries give foreign aid? The answers found in the literature are: (i) because donor countries care for recipient countries (e.g. altruism), and/or (ii) because there exist distortions that make the indirect gains from foreign aid (e.g. terms of trade effects) to be larger than the direct losses. This paper proposes a third answer to the above question, namely that aid is determined through the domestic political process of the donor country. The paper demonstrates how foreign aid affects the donor country’s income distribution and how, in a direct democracy, the majority of voters might benefit from foreign aid giving even though the country’s social welfare is reduced. JEL Classification: F35 Keywords: foreign aid, politics, majority voting.
URI: http://hdl.handle.net/10398/7488
Date: 1999-03-16

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