Follow the leader! The peer effect in aid supply decisions

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Abstract

This study assesses the existence of imitative behaviour among donors in terms of their aid supply. The urgency in addressing this subject is motivated by an increasing degree of aid volatility and unpredictability which may be linked to donors’ imitative behaviour.

Our results highlight that while any connection among donor peers is a potential channel for the transmission of aid volatility, the extent of such volatility decreases significantly in the presence of established imitative behaviour.

This result leads to the consideration that the promotion of donor imitative behavior would contribute to containing the current growing trend of volatility in aid supply.
Original languageEnglish
Pages (from-to)631-648
JournalDevelopment Policy Review
Volume36
Issue number6
Early online date20 May 2017
DOIs
Publication statusPublished - Oct 2018

Keywords

  • foreign aid
  • aid volatility
  • donor decision-making
  • donor coordination
  • peer effect

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