NONNESTED MODELS OF AUSTRALIA OVERSEAS AID PROGRAM

After briefly surveying the existing literature on overseas aid motivations, some empirical results are presented for Australian bilateral aid in terms of the two competing theories in the aid literature, namely the recipient need model and the donor interest model. The empirical results for Australia are atypical in that there is support for both hypotheses. This is in contrast to the results of previous studies of 'large' nation states, the United States, Britain, Germany, France and Japan, which have found support for the donor interest model but not the recipient need model. Given that the empirical results reported here are consistent with both models, this paper then proceeds to apply the relatively new tests of non-nested hypotheses to the models. The results indicate that Australia's aid program has both recipient need and donor interest concerns. In some years the recipient need motive dominates, and in other years, donor interest dominates.