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A Signal of Altruistic Motivation for Foreign Aid

Andrea Civelli (), Horowitz Andrew W. () and Arilton Teixeira ()
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Horowitz Andrew W.: Department of Economics, University of Arkansas, Business Building 402, Fayetteville, AR 72701, AR, USA

The B.E. Journal of Economic Analysis & Policy, 2016, vol. 16, issue 4, 31

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.

Keywords: foreign aid; donor motivation; bilateral aid; altruism (search for similar items in EconPapers)
JEL-codes: F35 F34 O47 O11 O19 (search for similar items in EconPapers)
Date: 2016
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