Is Foreign Aid a Pure Public Good for Donor Country Citizens?

Abstract

If donor country citizens are altruistic, their support for foreign aid will be instrumental and the (perceived) effects of a donor’s aid can be enjoyed non- rivalrously by citizens of all countries. Alternatively, donor country citizens may achieve a “warm-glow” from their own contributions to the poor, in which case "own" or "own country" level donations, rather than world donations are the relevant measure. If this is true then, all else equal, we expect smaller countries to have higher per capita aid provisions. This could account for why the small Nordic countries are more generous with foreign aid than a large country like the US. Based on a panel of 27 development assistance committee (DAC) countries covering the 1985-2005 period, we provide evidence that in large part supports the latter representation of voter interests.

Keywords: public economics, public goods, non-rivalrous goods, foreign aid, development assistance, expressive voting, warm-glow, median voter theory, impure altruism

JEL Classification: H41, F35