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Trade versus aid: donor generosity in an era of globalization

  • Erik Lundsgaarde

    ()

  • Christian Breunig

    ()

  • Aseem Prakash

    ()

Why do foreign aid budgets vary across countries and over time? Existing research indicates that the same set of factors shapes commitments toward both domestic and international redistribution. While scholars have acknowledged international normative influences on aid allocations, research on levels of donor generosity has not examined how international trade influences aid budgets. This paper examines whether imports from developing countries have a ‘displacement effect’ on aid commitments. Employing a panel of nineteen OECD donor countries, we analyze aid budgets from 1980 to 2000. We find that increased imports from developing countries to donor countries are associated with aid reductions. These results persist after controlling for international and domestic variables identified in previous research, and under other estimation techniques and model specifications. Copyright Springer Science+Business Media LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11077-007-9040-0
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Article provided by Springer in its journal Policy Sciences.

Volume (Year): 40 (2007)
Issue (Month): 2 (June)
Pages: 157-179

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Handle: RePEc:kap:policy:v:40:y:2007:i:2:p:157-179
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  1. 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.
  2. Rodrik, Dani, 1996. "Why do More Open Economies Have Bigger Governments?," CEPR Discussion Papers 1388, C.E.P.R. Discussion Papers.
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  4. Paul Collier & David Dollar, 2004. "Development effectiveness: what have we learnt?," Economic Journal, Royal Economic Society, vol. 114(496), pages F244-F271, 06.
  5. Noël, Alain & Thérien, Jean-Philippe, 1995. "From domestic to international justice: the welfare state and foreign aid," International Organization, Cambridge University Press, vol. 49(03), pages 523-553, June.
  6. Green, Donald P. & Kim, Soo Yeon & Yoon, David H., 2001. "Dirty Pool," International Organization, Cambridge University Press, vol. 55(02), pages 441-468, March.
  7. James Honaker & Gary King & Matthew Blackwell, . "Amelia II: A Program for Missing Data," Journal of Statistical Software, American Statistical Association, vol. 45(i07).
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