Determinants of Foreign Aid Under Alternative Institutional Arrangements

Abstract

This chapter aims to shed some light on economic foreign aid considering different institutional arrangements. In an early paper on economic and military aid, Masakatsu Kato includes several political and economic determinants reflecting strategic, cold-war, trade, economic development, and domestic goals. The decisive motives are identified by explicitly taking into account the behavior of the main decisionmakers as well as the alternative institutional arrangements under which the allocation process takes place. It is argued that bilateral aid is mainly influenced by the national government and the national bureaucracy. The distribution of bilateral and multilateral aid is influenced by the national government, the bureaucracy, voters/taxpayers, and interest groups. International organizations can also be regarded as bureaucracies in which the individual members further their own utility, subject to economic and political constraints. In analyzing the aid distribution process, R. D. McKinlay and R. Little explicitly distinguished between two models, the recipient need and the donor interest model.

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