This paper develops a two-period-two-country model in which an altruistic donor faces Samaritan's Dilemma to address two important policy questions: (i) whether foreign aid can lead to efficient level of capital investment in the recipient country and (ii) how do the form (e.g. budgetary...

We design a multiple project-funding contract that provides optimal incentives to recipients, in a setting where externalities exist among the multiple projects and where donors and recipients may differ in their valuation of the projects. To do so, we study optimal incentive payments in a...

Aid by altruistic donors may induce recipients to reduce their own contribution to development efforts in order to elicit more aid from donors. Help by well-intentioned donors may reduce the welfare of needy. Donors may not be able to deter deviant recipients as any punishment involves reducing...

The international community has advanced in reforming the international aid system. Such reform comes at a time when there is a renewed skepticism about aid effectiveness and when the crisis sheds new doubts about the sustainability of donors´ commitments. At the same time, the international...

This report makes some preliminary suggestions for actions to be taken by the international development community and the graduating countries to strengthen the process of preparing for graduation from the least developed country (LDC) category.The report also offers concrete proposals for...

Autocrats experiencing a windfall in unearned income may find it optimal to donate to other countries some of the windfall in order to make the state a less attractive prize to potential insurgents. We put forward a model that makes that prediction, as well as the additional predictions that the...

This paper discusses the entry of China into the game of foreign finance in Africa. It analyses the scope, destination and sectoral distribution of Chinese financial flows and trade in comparison with Western patterns and trends of aid, foreign direct investment FDI and trade. Chinas foreign aid...

We address the question of whether foreign aid helps attract foreign direct investment (FDI). This could be achieved if well targeted aid removed critical impediments to higher FDI inflows. In particular, we test the hypothesis that aid for education is an effective means to increase FDI flows...