Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/82001 
Year of Publication: 
1999
Series/Report no.: 
EPRU Working Paper Series No. 1999-07
Publisher: 
University of Copenhagen, Economic Policy Research Unit (EPRU), Copenhagen
Abstract: 
Why do donor countries give foreign aid? The answers found in the literature are: (i) because donor countries care for recipient countries (e.g. altruism), and/or (ii) because there exist distortions that make the indirect gains from foreign aid (e.g. terms of trade effects) to be larger than the direct losses. This paper proposes a third answer to the above question, namely that aid is determined through the domestic political process of the donor country. The paper demonstrates how foreign aid affects the donor country’s income distribution and how, in a direct democracy, the majority of voters might benefit from foreign aid giving even though the country’s social welfare is reduced.
Document Type: 
Working Paper

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