Geopolitics, Aid and Growth
AbstractWe investigate the effects of short-term political motivations on the effectiveness of foreign aid. Donor countries’ political motives might reduce the effectiveness of conditionality, channel aid to inferior projects or affect the way aid is spent in other ways, reduce the aid bureaucracy’s effort, and might impact the power structure in the recipient country. We investigate whether geopolitical motives matter by testing whether the effect of aid on economic growth is reduced by the share of years a country has served on the United Nations Security Council (UNSC) in the period the aid has been committed, which provides quasi-random variation in commitments. Our results show that the effect of aid on growth is significantly lower when aid has been granted for political reasons. We derive two conclusions from this. First, short-term political favoritism reduces growth. Second, political interest variables are invalid instruments for aid, raising doubts about a large number of results in the aid effectiveness literature.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4299.
Date of creation: 2013
Date of revision:
aid effectiveness; economic growth; politics and aid; United Nations Security Council membership; political instruments;
Find related papers by JEL classification:
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- F35 - International Economics - - International Finance - - - Foreign Aid
- F53 - International Economics - - International Relations and International Political Economy - - - International Agreements and Observance; International Organizations
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kevin Morrison, 2013. "Membership no longer has its privileges: The declining informal influence of Board members on IDA lending," The Review of International Organizations, Springer, vol. 8(2), pages 291-312, June.
- repec:idb:brikps:6725 is not listed on IDEAS
- William Hauk & Romain Wacziarg, 2009.
"A Monte Carlo study of growth regressions,"
Journal of Economic Growth,
Springer, vol. 14(2), pages 103-147, June.
- Axel Dreher & Jan-Egbert Sturm & James Raymond Vreeland, 2007.
"Development Aid and International Politics: Does membership on the UN Security Council influence World Bank decisions?,"
KOF Working papers
07-171, KOF Swiss Economic Institute, ETH Zurich.
- Dreher, Axel & Sturm, Jan-Egbert & Vreeland, James Raymond, 2009. "Development aid and international politics: Does membership on the UN Security Council influence World Bank decisions?," Journal of Development Economics, Elsevier, vol. 88(1), pages 1-18, January.
- Kilby, Christopher, 2009. "The political economy of conditionality: An empirical analysis of World Bank loan disbursements," Journal of Development Economics, Elsevier, vol. 89(1), pages 51-61, May.
- Robert K. Fleck & Christopher Kilby, 2006.
"How Do Political Changes Influence US Bilateral Aid Allocations? Evidence from Panel Data,"
Review of Development Economics,
Wiley Blackwell, vol. 10(2), pages 210-223, 05.
- Fleck, Robert K. & Kilby, Christopher, 2005. "How Do Political Changes Influence U.S. Bilateral Aid Allocations? Evidence from Panel Data," Vassar College Department of Economics Working Paper Series 67, Vassar College Department of Economics.
- Ilyana Kuziemko & Eric Werker, 2006. "How Much Is a Seat on the Security Council Worth? Foreign Aid and Bribery at the United Nations," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 905-930, October.
- Romain Wacziarg & Karen Horn Welch, 2008.
"Trade Liberalization and Growth: New Evidence,"
World Bank Economic Review,
World Bank Group, vol. 22(2), pages 187-231, June.
- Romain Wacziarg & Karen Horn Welch, 2003. "Trade Liberalization and Growth: New Evidence," NBER Working Papers 10152, National Bureau of Economic Research, Inc.
- Wacziarg, Romain & Welch, Karen Horn, 2003. "Trade Liberalization and Growth: New Evidence," Research Papers 1826, Stanford University, Graduate School of Business.
- Hristos Doucouliagos & Martin Paldam, 2005.
"The Aid Effectiveness Literature. The Sad Result of 40 Years of Research,"
Economics Working Papers
2005-15, School of Economics and Management, University of Aarhus.
- Hristos Doucouliagos & Martin Paldam, 2009. "The Aid Effectiveness Literature: The Sad Results Of 40 Years Of Research," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 433-461, 07.
- Doucouliagos , H. & Paldam, M., 2007. "The aid effectiveness literature: The sad results of 40 years of research," Cambridge Working Papers in Economics 0773, Faculty of Economics, University of Cambridge.
- Bermeo, Sarah Blodgett, 2011. "Foreign Aid and Regime Change: A Role for Donor Intent," World Development, Elsevier, vol. 39(11), pages 2021-2031.
- Alberto Alesina & David Dollar, 1998.
"Who Gives Foreign Aid to Whom and Why?,"
NBER Working Papers
6612, National Bureau of Economic Research, Inc.
- Olena Nizalova & Irina Murtazashvili, 2011.
"Exogenous Treatment and Endogenous Factors: Vanishing of Omitted Variable Bias on the Interaction Term,"
37, Kyiv School of Economics.
- Nizalova, Olena Y. & Murtazashvili, Irina, 2012. "Exogenous Treatment and Endogenous Factors: Vanishing of Omitted Variable Bias on the Interaction Term," IZA Discussion Papers 6282, Institute for the Study of Labor (IZA).
- Axel Dreher & Nathan Jensen, 2003.
"Independent Actor or Agent? An Empirical Analysis of the impact of US interests on IMF Conditions,"
0310004, EconWPA, revised 08 Jan 2004.
- Axel Dreher & Nathan Jensen, 2005. "Independent Actor or Agent? An Empirical Analysis of the impact of US interests on IMF Conditions," KOF Working papers 05-118, KOF Swiss Economic Institute, ETH Zurich.
- Berthelemy, Jean-Claude & Tichit, Ariane, 2004.
"Bilateral donors' aid allocation decisions--a three-dimensional panel analysis,"
International Review of Economics & Finance,
Elsevier, vol. 13(3), pages 253-274.
- Berthelemy, Jean-Claude & Tichit, Ariane, 2002. "Bilateral Donors' Aid Allocation Decisions: A Three-dimensional Panel Analysis," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Omar S. Bashir & Darren J. Lim, 2013. "Misplaced Blame," Journal of Conflict Resolution, Peace Science Society (International), vol. 57(3), pages 509-523, June.
- Bruno S. Frey & Paolo Pamini & Lasse Steiner, 2011.
"What determines the World Heritage List? An econometric analysis,"
ECON - Working Papers
001, Department of Economics - University of Zurich.
- Bruno S. Frey & Paolo Pamini & Lasse Steiner, 2011. "What Determines The World Heritage List? An Econometric Analysis," CREMA Working Paper Series 2011-01, Center for Research in Economics, Management and the Arts (CREMA).
- Eric Werker & Faisal Z. Ahmed & Charles Cohen, 2009. "How Is Foreign Aid Spent? Evidence from a Natural Experiment," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 225-44, July.
- Axel Dreher & Matthew Gould & Matthew D. Rablen & James Raymond Vreeland, 2012.
"The Determinants of Election to the United Nations Security Council,"
CEDI Discussion Paper Series
12-09, Centre for Economic Development and Institutions(CEDI), Brunel University.
- Axel Dreher & Matthew Gould & Matthew Rablen & James Raymond Vreeland, 2012. "The Determinants of Election to the United Nations Security Council," CESifo Working Paper Series 3902, CESifo Group Munich.
- World Bank, 2005. "World Development Indicators 2005," World Bank Publications, The World Bank, number 12426.
- Michael A. Clemens & Steven Radelet & Rikhil R. Bhavnani & Samuel Bazzi, 2012. "Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth," Economic Journal, Royal Economic Society, vol. 122(561), pages 590-617, 06.
- José Cheibub & Jennifer Gandhi & James Vreeland, 2010. "Democracy and dictatorship revisited," Public Choice, Springer, vol. 143(1), pages 67-101, April.
- Madeleine Hosli & Rebecca Moody & Bryan O’Donovan & Serguei Kaniovski & Anna Little, 2011. "Squaring the circle? Collective and distributive effects of United Nations Security Council reform," The Review of International Organizations, Springer, vol. 6(2), pages 163-187, July.
- Derek Headey, 2008. "Geopolitics and the effect of foreign aid on economic growth: 1970-2001," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(2), pages 161-180.
- Axel Dreher & Anna Minasyan & Peter Nunnenkamp, 2013. "Government Ideology in Donor and Recipient Countries: Does Political Proximity Matter for the Effectiveness of Aid?," Kiel Working Papers 1870, Kiel Institute for the World Economy.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If references are entirely missing, you can add them using this form.