Foreign economic aid; should donors cooperate?

Altruistic donors face common good problem which calls for cooperation and policy integration. On the other hand, the more united and responsible donors act towards the poor in the country that receives aid, the less domestic support does the poor get. I study these two countervailing effects of donor cooperation in different settings. Cooperation is always beneficial if donors can enforce contingent aid contracts. If contracts cannot be used, I show that cooperation can be harmful. I find that the negative effect of mutual aid policy is reduced if the donors face Samaritan's dilemma. (c) 2005 Elsevier B.V. All rights reserved.