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Changing Aid Regimes? U.S. Foreign Aid from the Cold War to the War on Terror

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Abstract

This paper explores how U.S. bilateral economic aid has or has not changed with the advent of the War on Terror. In particular, has the renewed geopolitical role of aid coincided with a reduction of aid to the poorest countries or less weight on need in U.S. aid allocation decisions? We start with an analysis of annual U.S. aid budgets from 1955 to 2006. Controlling for domestic political and economic conditions, we find that the impact of the War on Terror on the aid budget is significantly larger than is immediately apparent. To explore how the emphasis on need may have changed over time, we use country-level panel data on aid allocations to 119 countries across the same time period. This shows that U.S. aid flows – for the poorest as well as other developing countries – increased with the War on Terror. However, after rising for 35 years, the emphasis placed on need has been falling steadily for core aid recipients during the War on Terror.

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File URL: http://repec.library.villanova.edu/workingpapers/VSBEcon1.pdf
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Paper provided by Villanova School of Business Department of Economics and Statistics in its series Villanova School of Business Department of Economics and Statistics Working Paper Series with number 1.

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Date of creation: Mar 2009
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Handle: RePEc:vil:papers:1

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Web page: http://www.villanova.edu/business/facultyareas/economics/
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Keywords: Cold War; Foreign Aid; United States; War on Terror;

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