Donors Drive for Aid Allocation: A Public Choice Approach

Abstract

The flows of development assistance from donors to recipients have been addressed as the solution to worldwide poverty. However, there should be a reexamination to the theory that states that any development assistance is beneficial to any receiving nation no matter the situation. Prior surveys into development assistance allocation have concluded that development assistance is earmarked not only according to recipients development desires but also according to donor self-interest. Numerous researches have been conducted within the framework of ‘receiving nation need’ versus ‘donor interest’ models; most of the studies proposed that donors’ political decisions are not at all times in agreement with the declared objective of earmarking development assistance. This paper will discuss the literature determinants of the allocation of foreign aid in a political economic setting; it will reexamine the topic and look into the issue of what drives bilateral and multilateral donors to earmark development assistance to diverse developing economies by using a public choice theory.

Keywords: Aid allocation, Donor, Lobbies, Public Choice, Recipient, Utility maximizing