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Abstract

Donor’s demand equations for alternative forms of aid are derived for three allocation processes: noncooperative Nash-Cournot, cooperative Lindahl, and bureaucratic. Based on OECD data for official development assistance for 1970–2001, we apply non-nested tests to distinguish between Nash-Cournot and Lindahl reduced-form equations for 15 major donor nations. Noncooperative Nash-Cournot behavior characterizes many donors, with a few abiding by bureaucratic behavior and none by Lindahl behavior. Joint products are present for multilateral and bilateral giving. Despite the common-pool nature of giving to multilateral organizations, countries derive donor-specific benefits and often view others’ donations as complementary to their own gifts.

Keywords  Foreign aid - Multilateral organizations - Donor demand - Public goods - Joint products - Lindahl - Nash-Cournot

JEL codes  H41 - F35 - H87

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