To Invest or Insure? A Comment on Wright (2008)
Wright (2008) investigates how the impact of foreign aid on GDP growth in dictatorships depends on the dictator’s time horizon, i.e., how much longer the dictator expects to be in office. The empirical analysis finds a strong positive impact of aid on growth for dictators with long time horizons and a strong negative impact for dictators with short time horizons. Rerunning Wright’s specifications, we find the positive effect depends on two outlier observations for Jordan. Omitting these observations, aid has no effect in long time horizon dictatorships but continues to have a negative impact in short time horizon dictatorships. Thus, Wright’s core result—the dependence on leadership tenure expectations—survives, but the policy implications are radically different.
|Date of creation:||Jun 2012|
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