The Geopolitics of Foreign Aid

ABSTRACT The determinants of foreign aid policy have significantly shifted over time. Using a common factor analysis, we first build two time‐variant multidimensional geopolitical indicators for aid recipient nations. Second, using these indicators, we investigate the question of whether recipient's geopolitical importance has become a main factor determining donors' aid allocation. We find evidence that the role of “traditional” economic determinants is more and more dominated by that of geopolitical factors in explaining foreign aid allocation. It probably raises a new issue on a potential inequality in the world system of aid allocation due to donors' geopolitical interest.