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Geopolitics, aid and growth

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We investigate the effects of short-term political motivations on the effectiveness of foreign aid. Specifically, we test whether the effect of aid on economic growth is reduced by the share of years a country has served on the United Nations Security Council (UNSC) in the period the aid has been co...

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Bibliographic Details
Main Authors: Dreher, Axel (Author) , Eichenauer, Vera (Author) , Gehring, Kai (Author)
Format: Book/Monograph Working Paper
Language:English
Published: Heidelberg Universitätsbibliothek Heidelberg 2014
Series:Discussion Paper Series / University of Heidelberg, Department of Economics 575
In: Discussion paper series (575)

Online Access:Resolving-System, kostenfrei, Volltext: http://nbn-resolving.de/urn:nbn:de:bsz:16-heidok-175459
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Author Notes:Axel Dreher; Vera Eichenauer; Kai Gehring

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520 |a We investigate the effects of short-term political motivations on the effectiveness of foreign aid. Specifically, we test whether the effect of aid on economic growth is reduced by the share of years a country has served on the United Nations Security Council (UNSC) in the period the aid has been committed, which provides quasi-random variation in aid. Our results show that the relationship of aid with growth is significantly lower when aid has been committed during a country’s tenure on the UNSC. We derive two conclusions from this. First, short-term political favoritism reduces growth. Second, political interest variables are inadequate as instruments for overall aid, raising doubts about a large number of results in the aid effectiveness literature. 
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