Darlings and Orphans: Interactions across Donors in International Aid

Abstract

We examine how the bilateral aid flows from an individual donor to a recipient depend on the aid flows from all other bilateral and multilateral donors to that recipient. Thereby, we assess to what extent issues including donor coordination, free-riding, selectivity, specialization, and common donor interests drive bilateral aid allocations. We find that others’ bilateral flows lead to a significant increase in aid flows from a particular donor, but primarily within a given year. The effects are particularly pronounced for large donors and so-called “darling” recipients. Overall, the results suggest that herding is a dominant feature of aid inter-relationships.