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Government Ideology in Donor and Recipient Countries: Does Political Proximity Matter for the Effectiveness of Aid?

  • Axel Dreher
  • Anna Minasyan
  • Peter Nunnenkamp

Political proximity between donor and recipient governments may impair the effectiveness of aid by encouraging favoritism. By contrast, political misalignment between donor and recipient governments may render aid less effective by adding to transaction costs and giving rise to incentive problems. We test these competing hypotheses empirically by considering the political ideology of both governments along the left-right spectrum in augmented models on the economic growth effects of aid. Following the estimation approach of Clemens et al. (2012), we find that aid tends to be less effective when political ideology differs between the donor and the recipient

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File URL: https://www.ifw-members.ifw-kiel.de/publications/government-ideology-in-donor-and-recipient-countries-does-political-proximity-matter-for-the-effectiveness-of-aid/KWP_1870.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1870.

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Length: 27 pages
Date of creation: Aug 2013
Date of revision:
Handle: RePEc:kie:kieliw:1870
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  3. Torsvik, Gaute, 2005. "Foreign economic aid; should donors cooperate?," Journal of Development Economics, Elsevier, vol. 77(2), pages 503-515, August.
  4. Dreher, Axel & Eichenauer, Vera & Gehring, Kai, 2014. "Geopolitics, Aid and Growth," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100519, Verein für Socialpolitik / German Economic Association.
  5. Kilby, Christopher, 2009. "The political economy of conditionality: An empirical analysis of World Bank loan disbursements," Journal of Development Economics, Elsevier, vol. 89(1), pages 51-61, May.
  6. Christopher Kilby, 2012. "Assessing the contribution of donor agencies to aid effectiveness: The impact of World Bank preparation on project outcomes," Villanova School of Business Department of Economics and Statistics Working Paper Series 20, Villanova School of Business Department of Economics and Statistics.
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  9. Nathan Nunn & Nancy Qian, 2012. "Aiding Conflict: The Impact of U.S. Food Aid on Civil War," NBER Working Papers 17794, National Bureau of Economic Research, Inc.
  10. Andreas Fuchs & Axel Dreher & Peter Nunnenkamp, 2012. "Determinants of Donor Generosity: A Survey of the Aid Budget Literature," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 121, Courant Research Centre PEG.
  11. Viktor Brech & Niklas Potrafke, 2013. "Donor Ideology and Types of Foreign Aid," CESifo Working Paper Series 4314, CESifo Group Munich.
  12. Knack, Stephen & Rahman, Aminur, 2007. "Donor fragmentation and bureaucratic quality in aid recipients," Journal of Development Economics, Elsevier, vol. 83(1), pages 176-197, May.
  13. 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.
  14. Wacziarg, Romain & Welch, Karen Horn, 2003. "Trade Liberalization and Growth: New Evidence," Research Papers 1826, Stanford University, Graduate School of Business.
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  16. Derek Headey, 2008. "Geopolitics and the effect of foreign aid on economic growth: 1970-2001," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(2), pages 161-180.
  17. Lodewijk Smets & Stephen Knack & Nadia Molenaers, 2013. "Political ideology, quality at entry and the success of economic reform programs," The Review of International Organizations, Springer, vol. 8(4), pages 447-476, December.
  18. Dreher, Axel & Sturm, Jan-Egbert & Vreeland, James Raymond, 2009. "Development aid and international politics: Does membership on the UN Security Council influence World Bank decisions?," Journal of Development Economics, Elsevier, vol. 88(1), pages 1-18, January.
  19. Arnab Acharya & Ana Teresa Fuzzo de Lima & Mick Moore, 2006. "Proliferation and fragmentation: Transactions costs and the value of aid," Journal of Development Studies, Taylor & Francis Journals, vol. 42(1), pages 1-21.
  20. Doucouliagos , H. & Paldam, M., 2007. "The aid effectiveness literature: The sad results of 40 years of research," Cambridge Working Papers in Economics 0773, Faculty of Economics, University of Cambridge.
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  22. Axel Dreher & Nathan Jensen, 2003. "Independent Actor or Agent? An Empirical Analysis of the impact of US interests on IMF Conditions," International Finance 0310004, EconWPA, revised 08 Jan 2004.
  23. Nizalova, Olena Y. & Murtazashvili, Irina, 2012. "Exogenous Treatment and Endogenous Factors: Vanishing of Omitted Variable Bias on the Interaction Term," IZA Discussion Papers 6282, Institute for the Study of Labor (IZA).
  24. Michael A. Clemens & Steven Radelet & Rikhil R. Bhavnani & Samuel Bazzi, 2012. "Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth," Economic Journal, Royal Economic Society, vol. 122(561), pages 590-617, 06.
  25. Michael Faye & Paul Niehaus, 2012. "Political Aid Cycles," American Economic Review, American Economic Association, vol. 102(7), pages 3516-30, December.
  26. Bermeo, Sarah Blodgett, 2011. "Foreign Aid and Regime Change: A Role for Donor Intent," World Development, Elsevier, vol. 39(11), pages 2021-2031.
  27. Ilyana Kuziemko & Eric Werker, 2006. "How Much Is a Seat on the Security Council Worth? Foreign Aid and Bribery at the United Nations," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 905-930, October.
  28. Matteo Bobba & Andrew Powell, 2007. "Aid Effectiveness: Politics Matters," IDB Publications (Working Papers) 6725, Inter-American Development Bank.
  29. Christopher Kilby, 2011. "The Political Economy of Project Preparation: An Empirical Analysis of World Bank Projects," Villanova School of Business Department of Economics and Statistics Working Paper Series 14, Villanova School of Business Department of Economics and Statistics.
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