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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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    References listed on IDEAS

    as
    1. 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.
    2. Langlotz, Sarah & Dreher, Axel, 2015. "Aid and growth. New evidence using an excludable instrument," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112878, Verein für Socialpolitik / German Economic Association.
    3. Felicitas Nowak-Lehmann & Axel Dreher & Dierk Herzer & Stephan Klasen & Inmaculada Martínez-Zarzoso, 2012. "Does foreign aid really raise per capita income? A time series perspective," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 288-313, February.
    4. 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.
    5. Nizalova Olena Y. & Murtazashvili Irina, 2016. "Exogenous Treatment and Endogenous Factors: Vanishing of Omitted Variable Bias on the Interaction Term," Journal of Econometric Methods, De Gruyter, vol. 5(1), pages 71-77, January.
    6. Breitwieser, Anja & Wick, Katharina, 2016. "What We Miss By Missing Data: Aid Effectiveness Revisited," World Development, Elsevier, vol. 78(C), pages 554-571.
    7. Christensen, Zachary & Homer, Dustin & Nielson, Daniel L., 2011. "Dodging Adverse Selection: How Donor Type and Governance Condition Aid’s Effects on School Enrollment," World Development, Elsevier, vol. 39(11), pages 2044-2053.
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    Citations

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    Cited by:

    1. Fuchs, Andreas & Dreher, Axel & Hodler, Roland & Parks, Bradley C. & Raschky, Paul, 2015. "Aid on Demand: African Leaders and the Geography of China s Foreign Assistance," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112838, Verein für Socialpolitik / German Economic Association.
    2. Bjørnskov, Christian & Rode, Martin, 2016. "And Yet It Grows: Crisis, Ideology, and Interventionist Policy Ratchets," Working Paper Series 1135, Research Institute of Industrial Economics.
    3. 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.
    4. Dreher, Axel & Fuchs, Andreas & Langlotz, Sarah, 2018. "The Effects of Foreign Aid on Refugee Flows," CEPR Discussion Papers 12741, C.E.P.R. Discussion Papers.
    5. repec:eee:wdevel:v:96:y:2017:i:c:p:375-389 is not listed on IDEAS
    6. 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.
    7. repec:eee:wdevel:v:99:y:2017:i:c:p:320-334 is not listed on IDEAS

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