I analyze the effectiveness of U.S. private aid to recipient countries across the world. The motivation behind this study was the lack of research regarding the private sector of aid and its effectiveness towards humanitarian and economic outcomes. The majority of existing research has focused on official government-to-government aid. Results of these studies have shown official aid to be ineffective, failing to improve economic, humanitarian and political outcomes, or effective only under specific economic and political conditions. While official aid donors have been theorized to be self-interested organizations, often criticized for their lack of motivation to achieve goals and influenced by monetary incentives, private aid donors may have a more focused and well-directed approach and be less constrained by bureaucratic processes and fiscal incentives.
I hypothesize that U.S. private aid will have significantly different results than official aid by decreasing poverty and infant mortality rates, while improving sanitation, enrollment rates and governance. Using panel data from 2005 to 2012 provided by College of William and Mary’s Aid Data Lab, the private aid data is divided into three periods: pre-recession, during the recession and post-recession. There are two empirical frameworks for this study: (1) a multi-linear regression analysis which will undertake a variety of controls, including official aid, and (2) an instrumental variable regression analysis which will factor in the propensity of the recipient country to receive aid as well as internal economic factors in the U.S. as instruments for private aid allocations. The general results of these models show varying effects of private aid, with significant improvements in governance and infant mortality. Although the results may remain inconclusive due to the sheer size and magnitude of the data set, they provide sufficient information to conduct more research about the internal policies that influence private aid organizations to allocate the way they do and to understand how basic human needs can be met and improved worldwide.