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First impressions: How leader changes affect bilateral aid

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  • Rommel, Tobias
  • Schaudt, Paul

Abstract

This paper investigates a new mechanism to explain politically induced changes in bilateral aid. We argue that shifts in the foreign policy alignment between a donor and a recipient country following leadership changes induce reallocation of aid. Utilizing data from the G7 and 130 developing countries between 1975 and 2012 and employing high dimensional fixed effects models, we show that incoming leaders in recipient countries, which politically converge towards their current donors, receive more aid commitments, compared to those that diverge. Accounting for donor leader change, we additionally find that incumbent recipient leaders have an opportunity to get even more aid when political change in donor countries moves them closer to the donor's foreign policy position. Thus, leadership turnover in recipient and donor countries makes otherwise inconsequential deviations in foreign policy alignment highly consequential for aid provision.

Suggested Citation

  • Rommel, Tobias & Schaudt, Paul, 2020. "First impressions: How leader changes affect bilateral aid," Journal of Public Economics, Elsevier, vol. 185(C).
    • Handle: RePEc:eee:pubeco:v:185:y:2020:i:c:s0047272719301690
    DOI: 10.1016/j.jpubeco.2019.104107
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    Cited by:

    1. Fuchs, Andreas & Kaplan, Lennart & Kis-Katos, Krisztina & Leue, Sebastian & Turbanisch, Felix & Wang, Feicheng, 2025. "Tracking Chinese aid through China Customs," World Development, Elsevier, vol. 195(C).
    2. Eilers, Yota & Kluve, Jochen & Langbein, Jörg & Reiners, Lennart, 2023. "Volume, Risk, Complexity: What Makes Development Finance Projects Succeed or Fail?," IZA Discussion Papers 16691, IZA Network @ LISER.
    3. Bommer, Christian & Dreher, Axel & Perez-Alvarez, Marcello, 2022. "Home bias in humanitarian aid: The role of regional favoritism in the allocation of international disaster relief," Journal of Public Economics, Elsevier, vol. 208(C).
    4. Fuchs, Andreas & Kaplan, Lennart & Kis-Katos, Krisztina & Schmidt, Sebastian S. & Turbanisch, Felix & Wang, Feicheng, 2020. "Mask wars: China's exports of medical goods in times of COVID-19," Kiel Working Papers 2161, Kiel Institute for the World Economy.
    5. Gerda Asmus-Bluhm & Vera Z. Eichenauer & Andreas Fuchs & Bradley Parks, 2025. "Does India Use Development Finance to Compete With China? A Subnational Analysis," Journal of Conflict Resolution, Peace Science Society (International), vol. 69(2-3), pages 406-433, March.
    6. Lukas Wellner & Axel Dreher & Andreas Fuchs & Bradley C. Parks & Austin Strange, 2025. "Can Aid Buy Foreign Public Support? Evidence from Chinese Development Finance," Economic Development and Cultural Change, University of Chicago Press, vol. 73(2), pages 523-578.
    7. Victoria Kuzenkova, 2021. "Effective Development Institutions," Public administration issues, Higher School of Economics, issue 5, pages 161-175.
    8. Axel Dreher & Shu Yu, 2020. "The Alma Mater effect: Does foreign education of political leaders influence UNGA voting?," Public Choice, Springer, vol. 185(1), pages 45-64, October.
    9. Kosea Wambaka, 2023. "Impact of Bilateral and Multilateral Aid on Domestic Savings in Low and Middle-Income Sub Sahara African Countries: Mediating Role of Institutional Quality," International Business Research, Canadian Center of Science and Education, vol. 16(1), pages 1-26, January.

    More about this item

    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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