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Geopolitics, aid, and growth: the impact of UN security council membership on the effectiveness of aid

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  • Dreher,Axel
  • Eichenauer,Vera Z.
  • Gehring,Kai

Abstract

The paper investigates the effects of short-term political motivations on the effectiveness of foreign aid. Specifically, the paper tests whether the effect of aid on economic growth is reduced by the share of years a country served on the United Nations Security Council (UNSC) in the period the aid is committed, which provides quasi-random variation in aid. The results show that the effect of aid on growth is significantly lower when aid was committed during a country's tenure on the UNSC. This holds when we restrict the sample to Africa, which follows the strictest norm of rotation on the UNSC and thus where UNSC membership can most reliably be regarded as exogenous. Two conclusions arise from this. First, short-term political favoritism reduces the effectiveness of aid. Second, results of studies using political interest variables as instruments for overall aid arguably estimate the effect of politically motivated aid and thus a lower bound for the effect of all aid.

Suggested Citation

  • Dreher,Axel & Eichenauer,Vera Z. & Gehring,Kai, 2016. "Geopolitics, aid, and growth: the impact of UN security council membership on the effectiveness of aid," Policy Research Working Paper Series 7771, The World Bank.
  • Handle: RePEc:wbk:wbrwps:7771
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    Cited by:

    1. Bjørnskov, Christian & Rode, Martin, 2016. "And Yet It Grows: Crisis, Ideology, and Interventionist Policy Ratchets," Working Paper Series 1135, Research Institute of Industrial Economics.
    2. Axel Dreher & Shu Yu, 2016. "The Alma Mater Effect - Does Foreign Education of Political Leaders Influence Foreign Policy?," CESifo Working Paper Series 5871, CESifo Group Munich.
    3. Dreher, Axel & Fuchs, Andreas & Hodler, Roland & Parks, Bradley C. & Raschky, Paul A. & Tierney, Michael J., 2015. "Aid on Demand: African Leaders and the Geography of China's Foreign Assistance," CEPR Discussion Papers 10704, C.E.P.R. Discussion Papers.
    4. repec:eee:wdevel:v:96:y:2017:i:c:p:375-389 is not listed on IDEAS
    5. Sebastian Galiani & Stephen Knack & Lixin Colin Xu & Ben Zou, 2017. "The effect of aid on growth: evidence from a Quasi-experiment," Journal of Economic Growth, Springer, vol. 22(1), pages 1-33, March.
    6. repec:eee:wdevel:v:99:y:2017:i:c:p:320-334 is not listed on IDEAS

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