International Studies Quarterly
Playing Hard to Get: Strategic Signaling in Aid Bargaining
2026-08-08
Foreign aid is a political exchange between a donor and a target. Existing literature focuses primarily on the strategic actions of donors, but less is known about how targets advance their interests. This article explores the role of aid-receiving states as strategic actors who can extract concessions from donors. I model the aid exchange using a costly signaling model in which targets send a (potentially misleading) signal of their policy preferences before the donor makes an aid offer. In equilibrium, when the cost of sending a misleading signal is sufficiently low, targets who are aligned with a donor on policy sometimes lie about their alignment, which yields them aid that they would not have received otherwise. Empirically, I show that strategic nonresponse in the UN General Assembly—a low-cost signal of nonalignment—is correlated with higher future aid inflows.