Skip to main content

A Political Economy of Aid

  • Bruce Bueno de Mesquita (a1) and Alastair Smith (a2)

We model how the size of a leader's support coalition and government revenues affect trades between policy concessions and aid. We find that aid benefits donor and recipient leaders, while harming the recipient's, but not the donor's, citizenry. The willingness to grant policy concessions for aid depends on how easily leaders can reimburse supporters for their concession. As coalition size increases, incumbents rely more on public goods to reward supporters, making it difficult to compensate for policy concessions. Small-coalition leaders rely more on private goods to retain office, making it easier for them to grant policy concessions for aid. Empirical tests of bilateral aid transfers by Organization for Economic Cooperation and Development (OECD) nations between 1960 and 2001 support the predictions that (1) aid is given by wealthy, large-coalition systems; (2) relatively poor, small-coalition systems are most likely to get aid; but, (3) conditional on receiving aid, the amount increases as the recipient's coalition size, wealth, and policy salience increase. Evidence suggests that OECD members have little humanitarian motivation for aid giving.

Hide All
Alesina, Alberto, and Dollar, David. 2000. Who Gives Foreign Aid to Whom and Why? Journal of Economic Growth 5 (1):3363.
Bennett, D. Scott, and Rupert, Matthew C.. 2003. Comparing Measures of Political Similarity: An Empirical Comparison of S Versus tauB in the Study of International Conflict. Journal ofz Conflict Resolution 47 (3):367–93.
Bennett, D. Scott., and Stam, Allan C. III 2003. EUGene: Expected Utility Generation and Data Management Program. Version 3.201. Available at ⟨⟩. Accessed 14 January 2009.
Boone, Peter. 1996. Politics and the Effectiveness of Foreign Aid. European Economic Review 40 (2):289329.
Bueno de Mesquita, Bruce. 1975. Measuring Systemic Polarity. Journal of Conflict Resolution 19 (2):187215.
Bueno de Mesquita, Bruce, and Smith, Alastair. 2007. Foreign Aid and Policy Concessions. Journal of Conflict Resolution 51 (2):251–84.
Bueno de Mesquita, Bruce, and Smith, Alastair. 2009. Political Survival and Endogenous Institutional Change. Forthcoming in Comparative Political Studies 42 (2):167–97.
Bueno de Mesquita, Bruce, Smith, Alastair, Siverson, Randolph M., and Morrow, James D.. 2003. The Logic of Political Survival. Cambridge Mass.: MIT Press.
Burnside, Craig, and Dollar, David. 2000. Aid, Policies, and Growth. American Economic Review 90 (4):847–68.
Chiozza, Giacomo. 2007. Disaggregating Anti-Americanism: An Analysis of Individual Attitudes toward the United States. In Anti-Americanisms in World Politics, edited by Katzenstein, Peter J. and Keohane, Robert O., 93128. Ithaca, N.Y.: Cornell University Press.
Cingranelli, David L., and Pasquarello, Thomas E.. 1985. Human Rights Practices and the Distribution of U.S. Foreign Aid to Latin American Countries. American Journal of Political Science 29 (3):539–63.
Dollar, David, and Collier, Paul. 2002. Aid Allocation and Poverty Reduction. European Economic Review 46 (8):1475–500.
Dollar, David, and Levin, Victoria. 2006. The Increasing Selectivity of Foreign Aid, 1984–2003. World Development 34 (12):2034–46.
Easterly, William. 2002. The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics. Cambridge Mass.: MIT Press.
Easterly, William. 2006. The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good. London: Penguin Press.
Easterly, William, Levine, Ross, and Roodman, David. 2004. Aid, Policies, and Growth: Comment. American Economic Review 94 (3):774–80.
Feyzioglu, Tarhan, Swaroop, Vinaya, and Zhu, Min. 1998. A Panel Data Analysis of the Fungibility of Foreign Aid. World Bank Economic Review 12 (1):2958.
Gelb, Alan H. 1988. Windfall Gains: Blessing or Curse? New York: Oxford University Press.
Gleditsch, Kristian Skrede. 2002. Expanded Trade and GDP Data. Journal of Conflict Resolution 46 (5):712–24.
Griffin, Keith B. 1970. Foreign Capital, Domestic Savings and Economic Development. Bulletin of the Oxford University Institute of Economics and Statistics 32 (2):99112.
Heller, Peter S. 1975. A Model of Public Fiscal Behavior in Developing Countries: Aid, Investment, and Taxation. American Economic Review 65 (3):429–45.
Heston, Alan, Summers, Robert, and Aten, Bettina. 2002. Penn World Table Version 6.1. Center for International Comparisons at the University of Pennsylvania, October 2002. Available at ⟨⟩. Accessed 14 January 2009.
Hook, Steven W., and Zhang, Guang. 1998. Japan's Aid Policy Since the Cold War: Rhetoric and Reality. Asian Survey 38 (11):1051–66.
Humphreys, Macartan. 2005. Natural Resources, Conflict, and Conflict Resolution: Uncovering the Mechanisms. Journal of Conflict Resolution 49 (4):508–37.
Jensen, Nathan, and Wantchekon, Leonard. 2004. Resource Wealth and Political Regimes in Africa. Comparative Political Studies 37 (7):816–41.
Katzenstein, Peter J., and Keohane, Robert O.. 2007. Anti-Americanisms in World Politics. Ithaca, N.Y.: Cornell University Press.
Kim, Woosang. 1989. Power, Alliance, and Major Wars, 1816–1975. Journal of Conflict Resolution 33 (2):255–73.
Knack, Stephen. 2001. Aid Dependence and the Quality of Governance: Cross-Country Empirical Tests. Southern Economic Journal 68 (2):310–29.
Kuziemko, Ilyana, and Werker, Eric. 2006. How Much Is a Seat on the Security Council Worth? Foreign Aid and Bribery at the United Nations. Journal of Political Economy 114 (5):905–30.
Lumsdaine, David H. 1993. Moral Vision in International Politics: The Foreign Aid Regime, 1949–1989. Princeton, N.J.: Princeton University Press.
Maizels, Alfred, and Nissanke, Machicko K.. 1984. Motivations for Aid to Developing Countries. World Development 12 (9):879900.
Marshall, Monty G., Jaggers, Keith, and Gurr, Ted Robert. 2006. Polity IV Project: Political Regime Characteristics and Transitions, 1800–2003. Available at ⟨⟩. Accessed 14 January 2009.
Martens, Bertin, Mummert, Uwe, Murrell, Peter, and Seabright, Paul. 2002. The Institutional Economics of Foreign Aid. Cambridge: Cambridge University Press.
Mavrotas, George, and Ouattara, Bazoumana. 2006. Aid Disaggregation and the Public Sector in Aid Recipient Economies: Some Evidence from Cote D'Ivoire. Review of Development Economics 10 (3):434–51.
McKinlay, Robert D., and Little, Richard. 1977. A Foreign Policy Model of U.S. Bilateral Aid Allocations. World Politics 30 (1):5886.
McKinlay, Robert D., and Little, Richard. 1978. A Foreign Policy Model of the Distribution of British Bilateral Aid, 1960–70. British Journal of Political Science 8 (3):313–31.
Millennium Challenge Corporation. 2008. Programs and Activities. Available at ⟨⟩. Accessed 17 October 2008.
Milner, Helen V., and Tingley, Dustin H.. 2006. The Domestic Politics of Foreign Aid: American Legislators and the Politics of Donor Countries. Paper presented at the 102nd Annual Meeting of the American Political Science AssociationPhiladelphiaSeptember.
Noel, Alain, and Therien, Jean-Philippe. 1995. From Domestic to International Justice: the Welfare State and Foreign Aid. International Organization 49 (3):523–53.
Oneal, John R., and Russet, Bruce M.. 1999. The Kantian Peace: The Pacific Benefits of Democracy, Interdependence, and International Organizations, 1885–1992. World Politics 52 (1):137.
Organization for Economic Co-operation and Development (OECD). 2003a. International Development Statistics. Geographical Distribution of Financial Flows—Part I (Developing Countries). Vol. 2003, release 01. Paris: OECD.
Organization for Economic Co-operation and Development (OECD). 2003b. International Development Statistics. Geographical Distribution of Financial Flows—Part II (Countries in Transition). Vol. 2003, release 01. Paris: OECD.
Organization for Economic Co-operation and Development (OECD). 2008. Stat Extracts. Available at ⟨⟩. Accessed 14 January 2009.
Pack, Howard, and Pack, Janet Rothenberg. 1993. Foreign Aid and the Question of Fungibility. Review of Economics and Statistics 75 (2):258–65.
Remmer, Karen L. 2004. Does Foreign Aid Promote the Expansion of Government? American Journal of Political Science 48 (1):7792.
Ross, Michael L. 1999. The Political Economy of the Resource Curse. World Politics 51 (2):297322.
Sachs, Jeffrey D. 2005. The End of Poverty: Economic Possibilities for Our Time. New York: Penguin Press.
Sachs, Jeffrey D., and Warner, Andrew M.. 1995. Natural Resource Abundance and Economic Growth. National Bureau of Economic Research (NBER) Working Paper No. 5398. Cambridge, Mass: NBER.
Sachs, Jeffrey D., and Warner, Andrew M.. 2001. The Curse of Natural Resources. European Economic Review 45 (4–6):827–38.
Schraeder, Peter J., Hook, Steven W., and Taylor, Bruce. 1998. Clarifying the Foreign Aid Puzzle: A Comparison of American, Japanese, French, and Swedish Aid Flows. World Politics 50 (2):294323.
Smith, Alastair. 2008. The Perils of Unearned Income. Journal of Politics 70 (3):780–93.
U.S. Department of Commerce. 2003. Interactive Access to National Income and Product Accounts Tables. Bureau of Economic Analysis. Available at ⟨⟩. Accessed 14 January 2009.
World Bank. 2005. World Development Indicators. Washington, D.C.: World Bank.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

International Organization
  • ISSN: 0020-8183
  • EISSN: 1531-5088
  • URL: /core/journals/international-organization
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed