Article | Policy Review | June – July 2008

A Better Approach to Foreign Aid

by Justin Muzinich and Eric D. Werker


Frustration with U.S. foreign aid is widespread. At the same time, flows of private development finance—including foreign direct investment and remittances—have begun to dwarf official aid. We suggest a new approach that harnesses the power of private development finance to direct it towards developmental and foreign policy goals. Specifically, we argue that tax credits for companies, and tax breaks for individuals, can be used to incentivize productive investments while being a positive force for meaningful reform in the developing world.

Keywords: Developing Countries and Economies; Foreign Direct Investment; International Relations; Taxation; Welfare or Wellbeing; United States;


Muzinich, Justin, and Eric D. Werker. "A Better Approach to Foreign Aid." Policy Review 149 (June–July 2008).