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Aid Motivation in Early and Mature Partnerships: Is there a difference?

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Author Info

  • Olofsgård, Anders

    ()
    (Stockholm Institute of Transition Economics)

  • Perrotta, Maria

    ()
    (Stockholm Institute of Transition Economics)

  • Frot, Emmanuel

    ()
    (Microeconomix)

Abstract

We argue that the nature of aid flows early on in a bilateral partnership may be different from that at a later stage. Commercial and strategic interests may carry particular weight after a significant regime change when new relationships need to be established, whereas development concerns come to carry greater weight as the relationship matures. We test this argument using the natural experiment of the break-up of communism in Central and Eastern Europe and the former Soviet Union. By looking at the allocation of aid across recipients, how that allocation has changed over time, and the urgency by which donors entered certain markets, we get a sense of the donors' changing priorities. We find that trade flows and geographical proximity lead to more aid during the early period, 1990-95, but not after that. On the other hand, political openness and natural disasters have no effect in the early going but are correlated with more aid in the later time period. We also find that donors are in more urgency to enter into countries with higher per capita incomes and with which they trade, but they also prioritize more democratic countries in this respect. Our results hold up to a thorough sensitivity analysis, including using a gravity model to instrument for bilateral trade flows. Our findings may have implications for what to expect about partnerships, and the role of aid, emerging between Western donors and new regimes put in place by the Arab Spring.

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Bibliographic Info

Paper provided by Stockholm Institute of Transition Economics, Stockholm School of Economics in its series SITE Working Paper Series with number 17.

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Length: 37 pages
Date of creation: 13 Jul 2012
Date of revision:
Handle: RePEc:hhs:hasite:0017

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Postal: Stockholm Institute of Transition Economics, Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Phone: (+46 8) 736 9670
Fax: (+46 8) 31 64 22
Web page: http://www.hhs.se/site/
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Keywords: Foreign aid; aid allocation; transition countries;

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  1. Santos Silva, Joao & Tenreyro, Silvana, 2005. "The Log of Gravity," CEPR Discussion Papers 5311, C.E.P.R. Discussion Papers.
  2. Fleck, Robert K. & Kilby, Christopher, 2010. "Changing aid regimes? U.S. foreign aid from the Cold War to the War on Terror," Journal of Development Economics, Elsevier, vol. 91(2), pages 185-197, March.
  3. Maizels, Alfred & Nissanke, Machiko K., 1984. "Motivations for aid to developing countries," World Development, Elsevier, vol. 12(9), pages 879-900, September.
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  8. Anne Boschini & Anders Olofsg�rd, 2007. "Foreign aid: An instrument for fighting communism?," Journal of Development Studies, Taylor & Francis Journals, vol. 43(4), pages 622-648.
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  10. Younas, Javed, 2008. "Motivation for bilateral aid allocation: Altruism or trade benefits," European Journal of Political Economy, Elsevier, vol. 24(3), pages 661-674, September.
  11. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
  12. Frot, Emmanuel & Perrotta, Maria, 2009. "Aid Eff ectiveness: New Instrument, New Results?," SITE Working Paper Series 11, Stockholm Institute of Transition Economics, Stockholm School of Economics.
  13. Dollar, David & Alesina, Alberto, 2000. "Who Gives Foreign Aid to Whom and Why?," Scholarly Articles 4553020, Harvard University Department of Economics.
  14. Frot, Emmanuel, 2009. "Early vs. Late in Aid Partnerships and Implications for Tackling Aid Fragmentation," SITE Working Paper Series 1, Stockholm Institute of Transition Economics, Stockholm School of Economics.
  15. Ai, Chunrong & Norton, Edward C., 2000. "Standard errors for the retransformation problem with heteroscedasticity," Journal of Health Economics, Elsevier, vol. 19(5), pages 697-718, September.
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