Donor Positioning: Development Assistance from the U.S., Japan, France, Germany, and Britain

Abstract

In this study, I show that traditional models fail to account for a theoretically important, windfall profit that countries receive from their primary donors and that a consequence of neglecting this “bonus effect” is that models understate important (indirect) effects of donor interests on aid. Using a Heckman treatment model, I assess bilateral aid distributed to 101 countries, between 1970 and 1994, by the U.S., Japan, France, Germany, and the United Kingdom, the OECD’s five largest bilateral aid donors. These five analyses assume that, for a prospective aid recipient, a donor makes two interrelated decisions: (1) how much aid to give that country and (2) how to position itself relative to other donors (i.e., whether or not to be the primary donor). The findings support realist and neo-liberal arguments about the sources of donor aid policy.