Aid and inequality

This chapter assesses whether donors should, or do, care about national income inequality in aid recipient countries. It argues that there are empirically grounded instrumental reasons, alongside intrinsic ones, why inequality in recipient countries is relevant to donors’ broad goals of supporting economic growth and raising standards of living. Subsequently, the chapter shows OECD-DAC donors’ spending is consistent with a concern for the income distribution in recipient countries - evidenced in patterns of official development aid (ODA) spending of nearly $300bn over the last decade - though the spending is not necessarily framed or thought of in this way. Furthermore, there is a spectrum in national income inequality-related ODA spending from less to more political sensitivity. In general, OECD-DAC donors’ spending has focused on less politically sensitive areas though in the last decade spending in more politically sensitive areas has increased. We contrast OECD-DAC donor spending with ‘ODA-like’ spending by China.