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A Signal of Altruistic Motivation for Foreign Aid

Author

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  • Civelli Andrea

    (Department of Economics, University of Arkansas, Business Building 402, Fayetteville, AR 72701, AR, USA)

  • Horowitz Andrew W.

    (Department of Economics, University of Arkansas, Business Building 402, Fayetteville, AR 72701, AR, USA)

  • Teixeira Arilton

    (Ibmec, Belo Horizonte, Brazil)

Abstract

We develop a stylized theoretical model showing that countercyclical transfers from a wealthy donor to a poorer recipient generate a signal of altruistic donor motivation. Applying the model to OECD foreign aid (ODA) data we find the signal present in approximately one-sixth of a large set of donor–recipient pairs. We then undertake two out-of-model exercises to validate the signal: a logit regression of signal determinants and the growth effects of ODA from signal-positive pairs are compared to non-signal bearers. The logit indicates our signal meaningfully distinguishes donor–recipient pairs by characteristics typically associated with altruism. The growth exercise shows ODA from signal bearers displays stronger reverse causation and more positive long-run effects. Beyond foreign aid, our signal of altruistic motivation may be applicable to a wide range of voluntary transfers.

Suggested Citation

  • Civelli Andrea & Horowitz Andrew W. & Teixeira Arilton, 2016. "A Signal of Altruistic Motivation for Foreign Aid," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-31, October.
    • Handle: RePEc:bpj:bejeap:v:16:y:2016:i:4:p:31:n:14
    DOI: 10.1515/bejeap-2016-0024
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    References listed on IDEAS

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    2. Andrew W. Horowitz & Raja Kali & Hongwei Song, 2021. "Rethinking the aid–growth relationship: A network approach," Review of Development Economics, Wiley Blackwell, vol. 25(1), pages 359-380, February.
    3. Mukherjee Vivekananda & Rübbelke Dirk & Stahlke Theresa & Brumme Anja, 2022. "Allocation of Adaptation Aid: A Normative Theory," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 242(4), pages 471-499, August.

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    More about this item

    Keywords

    foreign aid; donor motivation; bilateral aid; altruism;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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