U.S. foreign aid: Marketization, social responsibility, and economic returns

Abstract

Abstract Aid has become a powerful asset for marketizing a donor's reputation under the guise of social responsibility. By fostering goodwill through capitalizing on their image as “good” donors, states enhance their competitive stance in global affairs over time. This paper examines U.S. foreign aid within the frameworks of social responsibility and the interplay between aid and trade. It assesses the policy gains the U.S. acquires through aid marketization, analyzing commercial returns from aid to 39 countries over 22 years. Employing the gravity equation and a Two‐Stage Least Square (2SLS) method with an instrumental variable approach, the research uncovers significant economic benefits. Findings reveal that U.S. foreign aid increases U.S. exports, with an average return of $8 in exports for every additional dollar spent on aid. This highlights the dual function of foreign aid in building goodwill and generating economic returns, particularly in the context of U.S. foreign policy.

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