A donor may use the inducement of grants to alter the manner in which recipients' lives are lived. A general model of a discriminating donor allocating grants among a number of potential recipients is derived and used to find the behavioral implications of the foreign aid objective of minimizing arms expenditures in developing nations. It is shown that a nation will receive greater sums of aid: (a) the more compliant it is to the tastes of the donor, (b) the more restrictive the terms of the grant, and (c) the lower its income level.
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