Foreign Aid as Globalization: Does the Road to Aid Parallel Trade?

Abstract

Studies of foreign aid have followed work in international political economy that explore and test the microfoundations of common political economy models. Nevertheless, they remain focused on determinants of aid in the “traditional” donors: members of the Organization for Economic Cooperation and Development’s Development Assistance Committee (DAC). Non-DAC donors and potential donors (that is, the states that do not give aid) are frequently ignored. I argue that a Stolper-Samuelson model of relative endowments of skilled and unskilled labor determine preferences for aid, just as they do for trade. Aid can alter factor endowments and their productivity in the recipient country. These changes, in turn, affect the returns to factors in potential donor countries and thus influence preferences among citizens. I test this approach using the 1995 World Values Survey. I contribute to the literature on individual preferences for aid by testing this argument without respect to a country’s donor status: both DAC, non-DAC, and non-donor countries are included in this sample. I then discuss “next steps” to connect individual level aid research to macro-level data.