Revealed Preferences in US Bilateral Aid, 1960-2000
Mazzotta, Ben
2005
- Submitted in partial fulfillment of the degree Master of Arts in Law and Diplomacy at the Fletcher School of Law and Diplomacy. Abstract: This paper proposes and evaluates determinants of US bilateral foreign aid. An earlier cross-country comparison of donors (Alesina and Dollar, 1998) suggested two determinants that offer limited explanatory power as determinants of bilateral aid flows: colonial ... read morerelationships and political ties. As the US has no colonial relationships, the former makes no prediction of US bilateral aid spending. The latter is measured by proxy in Alesina and Dollar's work, through the correlation of UN votes between donor and recipient. As they acknowledge, this measure potentially suffers from reverse causality (Alesina and Dollar, 1998). I offer four hypotheses for determinants of US bilateral aid spending: 1. Trade ties with the recipient country. 2. Operations of the US military, 3. Political events in the recipient country, and 4. Economic events in the recipient country, In order to test these hypotheses, I use data from the USAID Green Book, which specifies types of spending including military and economic assistance, and modalities of spending including loans and grants (USAID 2002). The Green Book data are the dependent variables in cross-sectional regressions on indicators of governments political leanings and democratic performance, indicators of economic health, the presence of a named US military operation, and indicators of economic relationships with the US. Indicators of governments' political leanings come from the World Bank's Database of Political Institutions. Democratic performance comes from the Polity variable in the Polity IV dataset from the University of Maryland's Integrated Network for Societal Conflict Research. Indicators of economic health are found in the Penn World Table, from the University of Pennsylvania's Center for International Comparisons. The list of named US military operations comes from Global Security, a Washington think tank. The closeness of economic ties with the US is measured with the IMF's Direction of Trade Statistics historic series. The specific composition of the variables and controls is listed below in the section 'Data'. The regressions in Tables 1 to 4 assess the revealed preferences of the US foreign aid programs in aggregate. Washington allocates bilateral aid to countries that are trading partners, that are poorer, that are secular, and that have strong nationalist executive parties. US bilateral aid rises in response to adverse economic shocks. US bilateral aid falls in real per capita terms over time. Economic assistance, and specifically USAID spending, is highest when centrists and nationalists control the executive branch. Economic assistance shies away from countries with major religious parties. Contrary to popular opinion, Washington (on an intercontinental, decades-long scale) does not lavish aid on right-wing governments, nor does it systematically undermine the left.read less
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- q237j397m
- Component ID:
- tufts:UA015.012.DO.00097
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