Explaining a new foreign aid recipient: the European Union’s provision of aid to regional trade agreements, 1995–2013

Intergovernmental organizations (IGOs) are increasingly recipients in the foreign aid budgets of donors. What explains the emergence of IGOs as recipients of foreign aid? While conventional wisdom suggests that foreign aid is primarily a foreign policy tool used by donor countries, I argue that aid allocated to IGOs is not explained through the lens of donor interests. Rather, it is the independent institutional design of the IGO aid recipient that makes them attractive recipients of aid which is intended to promote economic development, not donor state interests. Thus, aid to IGO recipients is explained on the basis of recipient development need and the independent institutional design of the IGO. Using original data on European Union aid allocations to a specific type of IGO, the regional trade agreement (RTA), this paper demonstrates that RTAs with more independent institutional designs and greater economic and/or trade need indeed receive more aid than their less independent, less needy peers. Further, these results hold even when controlling for donor interests and across multiple models/techniques. These results shed light on this emerging, new type of foreign aid recipient and argue for a need to re-evaluate the state-recipient focus of the aid allocation literature.