Why do allies receive less aid than non-allies?

Traditionally, scholars believe that formal defense alliances increase foreign aid allocation. However, this paper finds since the 1970s, OECD donors have been increasing their development assistance to non-allies, and by the mid-2000s, the average amount of aid allocated to non-allies has surpassed that of allies. What explains this changing pattern of alliance and foreign aid allocation? This paper argues that alliance’s impact on foreign aid is conditional on the global security environment, defined as the sum of hostility and insecurity between all states in the system. Alliance can save donors’ budgets through attraction and substitution mechanisms when the security environment is favorable. This paper contributes to the debate on the cost of alliances by showing that alliances can reduce the financial burden of the leading state. It will test the hypothesis with two-way fixed effect models and various robustness checks using foreign aid data from 1960 to 2013.