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How Do Political Changes Influence U.S. Bilateral Aid Allocations? Evidence from Panel Data

This paper examines the role of U.S. domestic politics in the allocation of foreign aid using panel data on aid to 119 countries from 1960 to 1997. Employing proxies for four aid allocation criteria (development concerns, strategic importance, commercial importance, and the degree of democratization), we find evidence that each influences aid allocation, although the evidence is stronger for some criteria (development concerns, commercial importance) than for others (strategic importance, degree of democratization). Furthermore, the allocation pattern depends on the composition of the U.S. government. When the president and Congress are liberal, development concerns receive more weight in the allocation process than when the president and/or Congress are more conservative. When the Congress is more conservative, commercial concerns have more weight than when the Congress is liberal. These findings have practical importance in light of current attempts to overhaul the allocation of both bilateral and multilateral aid.

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File URL: http://irving.vassar.edu/VCEWP/VCEWP67.pdf
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Paper provided by Vassar College Department of Economics in its series Vassar College Department of Economics Working Paper Series with number 67.

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Date of creation: Feb 2005
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Handle: RePEc:vas:papers:67
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  1. 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.
  2. Robert K. Fleck & Christopher Kilby, 2006. "World Bank Independence: A Model and Statistical Analysis of US Influence," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 224-240, 05.
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  4. Alberto Alesina & David Dollar, 1998. "Who Gives Foreign Aid to Whom and Why?," NBER Working Papers 6612, National Bureau of Economic Research, Inc.
  5. Ball, Richard & Johnson, Christopher, 1996. "Political, Economic, and Humanitarian Motivations for PL 480 Food Aid: Evidence from Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 44(3), pages 515-37, April.
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  8. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
  9. Gang, Ira N. & Lehman, James A., 1990. "New directions or not: USAID in Latin America," World Development, Elsevier, vol. 18(5), pages 723-732, May.
  10. Robert K. Fleck & Christopher Kilby, 2001. "Foreign Aid and Domestic Politics: Voting in Congress and the Allocation of USAID Contracts across Congressional Districts," Southern Economic Journal, Southern Economic Association, vol. 67(3), pages 598-617, January.
  11. Hansen, Henrik & Tarp, Finn, 2000. "Aid and Growth Regressions," MPRA Paper 62288, University Library of Munich, Germany.
  12. Alberto Alesina & Beatrice Weder, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," American Economic Review, American Economic Association, vol. 92(4), pages 1126-1137, September.
  13. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  14. Dudley, Leonard & Montmarquette, Claude, 1976. "A Model of the Supply of Bilateral Foreign Aid," American Economic Review, American Economic Association, vol. 66(1), pages 132-42, March.
  15. Thomas Barnebeck Andersen & Henrik Hansen & Thomas Markussen, 2006. "US politics and World Bank IDA-lending," Journal of Development Studies, Taylor & Francis Journals, vol. 42(5), pages 772-794.
  16. Frey, Bruno S. & Schneider, Friedrich, 1986. "Competing models of international lending activity," Journal of Development Economics, Elsevier, vol. 20(2), pages 225-245, March.
  17. William Easterly & Ross Levine & David Roodman, 2004. "Aid, Policies, and Growth: Comment," American Economic Review, American Economic Association, vol. 94(3), pages 774-780, June.
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