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Why it pays for aid recipients to take note of the Millennium Challenge Corporation: Other donors do!

Author

Listed:
  • Axel Dreher

    (Georg-August University Goettingen)

  • Peter Nunnenkamp

    (Kiel Institute for the World Economy)

  • Hannes Öhler

    (Georg-August University Goettingen)

Abstract

It is widely believed that the Millennium Challenge Corporation (MCC) has grossly fallen short of high expectations raised by the Bush administration in 2002. From the perspective of potential recipient countries, the crucial issue is whether the MCC increased the overall pool of aid resources available to them. We argue that this question extends far beyond the distribution of the limited MCC resources. By employing OLS and treatment-effects estimations, we assess how other US aid agencies and non-US donors reacted to MCC decisions. We find that positive signaling effects tend to dominate possible substitution effects not only for overall US aid but also for multilateral donors. Regarding other bilateral donors the evidence is mixed.

Suggested Citation

  • Axel Dreher & Peter Nunnenkamp & Hannes Öhler, 2010. "Why it pays for aid recipients to take note of the Millennium Challenge Corporation: Other donors do!," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 29, Courant Research Centre PEG.
    • Handle: RePEc:got:gotcrc:029
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    References listed on IDEAS

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    Cited by:

    1. Masaki, Takaaki, 2016. "Coups d’État and Foreign Aid," World Development, Elsevier, vol. 79(C), pages 51-68.
    2. Bickenbach, Frank & Mbelu, Asithandile & Nunnenkamp, Peter, 2019. "Is foreign aid concentrated increasingly on needy and deserving recipient countries? An analysis of Theil indices, 1995–2015," World Development, Elsevier, vol. 115(C), pages 1-16.
    3. Öhler, Hannes & Nunnenkamp, Peter & Dreher, Axel, 2012. "Does conditionality work? A test for an innovative US aid scheme," European Economic Review, Elsevier, vol. 56(1), pages 138-153.
    4. Knack, Stephen & Xu, Lixin Colin & Zou, Ben, 2014. "Interactions among donors'aid allocations : evidence from an exogenous World Bank income threshold," Policy Research Working Paper Series 7039, The World Bank.
    5. Takaaki Masaki & Bradley C. Parks, 2020. "When do performance assessments influence policy behavior? Micro-evidence from the 2014 Reform Efforts Survey," The Review of International Organizations, Springer, vol. 15(2), pages 371-408, April.
    6. Katharina Stepping, 2012. "Do poor health conditions lead to higher allocation of development assistance?," MAGKS Papers on Economics 201230, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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    More about this item

    Keywords

    official development aid; Millennium Challenge Corporation; additionality; signaling; United States; other DAC donors;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid

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