Academic journal article Political Research Quarterly

Donor Positioning: Development Assistance from the U.S., Japan, France, Germany, and Britain

Academic journal article Political Research Quarterly

Donor Positioning: Development Assistance from the U.S., Japan, France, Germany, and Britain

Article excerpt

In this study, I show that traditional models fail to account for a theoretically important, windfall profit that countries receive from their primary donors and that a consequence of neglecting this "bonus effect" is that models understate important (indirect) effects of donor interests on aid. Using a Heckman treatment model, I assess bilateral aid distributed to 101 countries, between 1970 and 1994, by the U.S., Japan, France, Germany, and the United Kingdom, the OECD's five largest bilateral aid donors. These five analyses assume that, for a prospective aid recipient, a donor makes two interrelated decisions: (1) how much aid to give that country and (2) how to position itself relative to other donors (i.e., whether or not to be the primary donor). The findings support realist and neo-liberal arguments about the sources of donor aid policy.

Does it mean anything to the U.S., Japan, or any other donor that it is, or is not, the main source of bilateral aid for any given developing country? More precisely, once accounting for factors that directly affect the amount of bilateral aid that donors give to a country, do attempts by self-interested donors to achieve or remain the primary donor for that country qualify it for a bonus allocation? To address that question, I specify and test Heckman treatment models that explain the bilateral allocation of aid to 101 countries (in the 1970-1994 period) by the U.S., Japan, France, Germany, and the United Kingdom, the five largest bilateral aid donors of the OECD Development Assistance Committee (DAC). These five (cross-sectional timeseries) analyses disclose that traditional models fail to account for a theoretically important, windfall profit that countries receive from their primary donors. This bonus can be viewed as a significant indirect effect of donor interests on aid.

DONOR INTERESTS, COMPETITION, AND COORDINATION

Although tests of quantitative models reveal that donors are self-interested (Lebovic 1988; Meernik et al. 1988; Schraeder et al. 1998), these models ignore effects should self-interested donors try to multiply the impact of aid by becoming the main contributor for a country. These indirect effects are suggested by the so-called bargaining model (Moon 1983: 317-20) which posits that donors use aid to reward (or compensate) a country for its UN votes, trade, security links, et cetera. This model informs most quantitative studies of self-interested donor behavior (Richardson 1978: 64; Poe 1992: 153). It can also explain why donors become dominant donors if: (1) by reason of interest, donors regard certain countries as aid priorities, (2) donors stake and defend their priorities by "outbidding" other donors, and (3) being a primary donor confers prestige (Morgenthau 1985: 87) upon the donor or entitles it to additional compensation, such as indivisible concessions (e.g., military basing rights). If these assumptions hold, the self-interested donor is a "strategic" donor that concentrates its aid for competitive advantage: it settles for no less than being the largest donor for priority countries.

These assumptions fit comfortably with the realist arguments that states compete with each other, often pursue their priorities with large resource commitments, and view power as profoundly relative (Waltz 1979). But the model draws useful insights, as well, from the neoliberal logic by which competition induces cooperation (Keohane and Martin 1995; Martin 1992). Competition currently exists among DAC donors by virtue of nationalistic, practical, and philosophical concerns that prevent donors from ceding operational control of aid to other donors, efforts by recipients to play contributors off against one another, and clashes in donor interest (Krueger et al. 1989). At the same time, donors want to avoid inequities that would result if they were to aid the same countries, inefficiencies in development policy that occur when donors work at cross purposes, or the costs when donors must pay a "market price" for recipient concessions. …

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