Humanitarianism or self-serving hypocrisy? : the provision of aid to South Africa under the Hawke-Keating and Howard governments

General perceptions of foreign aid commonly engender images of humanitarianism and altruism, whereby the humanitarian needs of the recipient of development assistance are of the utmost priority of the aid donor. However, the Australian governments led by Hawke, Keating and Howard often gave humanitarianism a low emphasis, frequently placing Australia’s own foreign policy and economic concerns at the forefront of aid allocation – often unashamedly. This self-interest met through aid meant that most was provided to Australia’s regional neighbourhood, neglecting some of the poorest, most struggling states, including South Africa. Other issues and events, including the Cold War, apartheid, terrorism and HIV/AIDS also affected Australia’s aid policy; mostly, they were used as excuses to limit aid to states like South Africa.

Competition for aid and trade policy

This paper considers the optimal allocation of a given amount of foreign aid between two recipient countries. It is shown that, given consumer preferences, a country following a more restrictive trade policy would receive a smaller share of the aid if the donor country maximises its own welfare in allocating aid. If, on the other hand, the donor country allocates aid in order to maximize the sum of the welfare of the two recipient countries, the result is just the opposite. Finally, we analyze the situation where the recipient countries compete with each other for the given amount of aid. It is shown that this competition tends to lower the level of optimal tariffs in the recipient countries.

Lobbying by ethnic groups and aid allocation

We develop a political-economic model of foreign aid allocation. Each ethnic group in the donor country lobbies the government to allocate more aid to its country of origin, and the government accepts political contributions from lobby groups. Initial per-capita income of the recipients and those of the ethnic groups are shown to be important determinants of the solution of the political equilibrium. We also examine the effects of changes in the degree of corruption, aid fatigue, and ethnic composition, in the donor country on the allocation of aid.

Logic of aid in an intertemporal setting

The paper studies the welfare implications of temporary foreign aid in the context of a simple two-country model of trade. In addition to its usual effects, a transfer of income in one period is assumed to influence the preferences of the recipient country in the following period. The implied changes in the terms of trade over the two periods are consistent with a number of possible outcomes with respect to the intertemporal welfare of the donor, the recipient, and the world as a whole. Particular attention is devoted to the conditions for strict Pareto improvement and the circumstances under which temporary aid transactions are likely to occur.

On the tying of aid to tariff reform

This paper considers the welfare effects of foreign aid that is tied to changes in the recipient's tariff. By constructing a three-country model with tariffs, and by allowing for changes both in the amount of aid and in the tariff rates, we are able to consider the welfare implications of two different rules of aid conditionality: (i) a rule which leaves the donor's welfare unchanged, and (ii) a rule which leaves the recipient government's total revenue unchanged. It is shown that the tying of aid to a tariff reform can, inter alia, be used to ensure Pareto improvement.

Tied aid, unemployment and welfare

The effect of foreign aid on the welfare levels of both the recipient and the donor country has been a much analysed topic for research in both the theory of international trade and development economics. In the development economics literature, concerns have been raised since the 1960s on the possible adverse effect of foreign aid on domestic savings and growth.1 The trade theory literature in this respect is much older and dates back to the 1920s when Professors Keynes and Ohlin debated on the effect of foreign aid on international terms of trade.2 Ever since, the terms of trade effect has been the cornerstone in the analysis of the welfare effect of foreign aid in the trade theory literature.3 After some early confusion, it is now well established that in a Walrasian stable world economy with two countries, a necessary condition for foreign aid to have perverse effects is that there is some distortion in either of the two countries.4 It is also known that, under normality and substitutability of goods, untied aid cannot be strictly Pareto-improving in a tariff distorted world.5

Encouraging clean energy investment in developing countries: what role for aid?

A large portion of foreign assistance for climate change mitigation in developing countries is directed to clean energy facilities. To support international mitigation goals, however, donors must make investments that have effects beyond individual facilities. They must reduce barriers to private-sector investment by generating information for developers, improving relevant infrastructure, or changing policies. We examine whether donor agencies target financing for commercial-scale wind and solar facilities to countries where private investment in clean energy is limited and whether donor investments lead to more private investments. On average, we find no positive evidence for these patterns of targeting and impact. Coupled with model results that show feed-in tariffs increase private investment, we argue that donor agencies should reallocate resources to improve policies that promote private investment in developing countries, rather than finance individual clean energy facilities.

Civil Society Aid to Post-Communist Countries

A major debate within foreign aid literature is whether civil society can be ‘purchased’ through outside assistance.We test this proposition by exploring the influence of aid provided by the United States Agency for International
Development on post-communist civil rights environments. A review of research critical of international assistance highlights the risk of unsustainability, polarization and dependence among recipient civic organizations.We argue that
a more effective stimulant is socio-economic growth, which stimulates committed constituencies, higher citizen expectations and pressure on the state to protect civil freedoms. Using cross-sectional, time-series data from 27
post-communist countries, we find no evidence that aid independently promotes stronger civil rights environments but that economic growth produces substantial improvements. Further, any aid effectiveness appears to be conditional on economic strength.We conclude that developmental organizations should reassess how and where civil society aid is targeted.

Impact of four foreign aided projects on developments in secondary education in Bangladesh

Examines four foreign aided development projects in the secondary education sub-sector in Bangladesh. Investigates planning and implementation practices employed during the life of the four projects in order to identify factors likely to lead to greater sustainability of development projects financed with foreign aid. A major concern was how foreign aided projects sustain, or lack the means to sustain, developments that have begun when project funding ceases.

Aid, economic reform, and public sector fiscal behaviour in developing countries

This paper looks at interactions between foreign development aid, economic reform, and public sector fiscal behavior. It proposes a model of the public sector fiscal response to aid inflows, which allows for changes in structural relationships due to an exogenously imposed program of economic reform. This model is applied to 1960–99 time series data for the Philippines, which embarked on an IMF- and World Bank-funded structural adjustment program in 1980. Estimates of structural and reduced-form equations paint a dismal picture of the effectiveness of foreign aid to, and the structural adjustment program in, the Philippines so far as fiscal impacts are concerned. Both bilateral and multilateral aid inflows, and the presence of an economic reform program, are associated with decreases in public fixed capital expenditure, decreases in taxation and other recurrent revenue, and decreases in public sector saving. Multilateral aid also appears to be highly fungible.

Modelling inter-temporal aid allocation : a new application with a focus on Papua New Guinea

This paper models the inter-temporal allocation of foreign development aid to Papua New Guinea (PNG). A formal theoretical model of aid allocation is developed, in which aid to any one country is determined jointly with aid to all other recipient countries. This is recognized in the econometric application of this model, which involves simultaneously modelling aid to a number of countries in addition to PNG. Results based on data for the period 1969–99 indicate that both recipient need and donor interest variables determine the amount of foreign aid to PNG and most other countries under consideration.

What determines bilateral aid allocations? New evidence for time series data

This paper models the allocation of bilateral foreign development aid to developing countries. A simple theoretical framework is developed, in which aid is treated as a private good of a donor country bureaucratic group responsible for bilateral aid allocation. This model is applied to time series data for ten principal recipients of bilateral official development assistance. Features of this application are that it caters for the joint determination of aid allocations and for donor allocation behavior to differ among individual recipient countries. Results indicate that both recipient need and donor interest variables determine the amount of foreign aid to developing countries, and that donor allocation behavior often differs markedly among recipients.

Aid and growth in small island developing states

Aid flows to small island developing states (SIDS) are enormous by international standards when compared to the size of their economies. Yet these countries face many severe economic challenges and many have experienced declines in the living standards of their citizens. This paper looks at the impact of aid on what is treated as a necessary precondition for improvements in living standards, typically defined. Specifically, it examines the impact of foreign aid on real per capita income growth in SIDS by econometrically analysing cross-country data for the period 1980 to 2004. A variety of econometric techniques and measures of aid are used. Results suggest that foreign aid is effective at spurring economic growth but with diminishing returns.

Aid, debt burden and government fiscal behaviour in Côte d'Ivoire

This paper examines the impact of foreign aid on public sector fiscal behaviour in Co^te d’Ivoire. A special interest is the relationship between aid, debt servicing and debt, given that Coˆte d’Ivoire is a highly indebted country. The theoretical model employed differs from those of previous studies by highlighting the interaction between debt servicing and the other fiscal variables, providing information on aid and fiscal behaviour that its predecessors cannot. This model is estimated using 1975–99 time series data. Two key findings emerge: (i) the majority of aid inflows are allocated to expenditure on debt servicing; and (ii) these inflows are associated with increases in the level of public debt.