Working Paper Series, Department of Economics, Copenhagen Business School
Wolfgang Meyer and Pascalis Raimondos-Møller
THE POLITICS OF FOREIGN AID
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
domestic political process of the donor country. The paper
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.
Keywords: foreign aid; politics; majority voting.; (follow links to similar papers)
JEL-Codes: F35; (follow links to similar papers)
20 pages, March 2, 1999
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