🔎 What Was Investigated

Donors give considerably more foreign aid to former colonies than to countries without colonial ties, but the reasons are unclear. Existing models often include colonial history without theoretical justification, and the explanation offered by Bueno de Mesquita and Smith (2009) reveals an interpretational problem: colonial history both raises a recipient's saliency to donors and has left lasting effects on recipients' social and political institutions. Both channels can affect aid flows, making the routine positive coefficient on colonial history ambiguous.

📊 How the Question Was Answered

A decomposition approach from labor econometrics was applied to separate the overall "colony" effect on aid into components attributable to donor saliency versus recipient institutional legacies. This strategy directly addresses the inferential quandary posed by the dual influence of colonial ties.

🧾 Key Findings

• About 75–100% of the colony effect on foreign aid stems from greater saliency that donors give to policy concessions from former colonies.
• A much smaller share is attributable to the lasting social and political institutions left by colonial rule.
• The routinely observed positive, sizable, and significant coefficient on colonial history therefore primarily reflects donor preferences for concessions rather than recipient institutional quality.

❗️ Why It Matters

These results clarify the meaning of the colonial-history coefficient in aid models and resolve a central interpretational problem: colonial ties predominantly capture donor attention to concessions. This reorients how researchers and analysts should read and model the role of colonial legacy in studies of foreign aid.