Why it Pays for Aid Recipients to Take Note of the Millennium Challenge Corporation: Other Donors Do!

CEGE Discussion Paper No. 99

31 Pages Posted: 11 Apr 2010 Last revised: 4 Jul 2012

See all articles by Axel Dreher

Axel Dreher

Heidelberg University

Peter Nunnenkamp

University of Kiel

Hannes Öhler

University of Goettingen (Gottingen)

Date Written: April 9, 2010

Abstract

It is widely believed that the Millennium Challenge Corporation (MCC) has grossly fallen short of high expectations raised by the Bush administration in 2002. From the perspective of potential recipient countries, the crucial issue is whether the MCC increased the overall pool of aid resources available to them. We argue that this question extends far beyond the distribution of the limited MCC resources. By employing OLS and treatment-effects estimations, we assess how other US aid agencies and non-US donors reacted to MCC decisions. We find that positive signaling effects tend to dominate possible substitution effects not only for overall US aid but also for multilateral donors. Regarding other bilateral donors the evidence is mixed.

Keywords: official development aid, Millennium Challenge Corporation, additionality, signaling, United States, other DAC donors

JEL Classification: F35

Suggested Citation

Dreher, Axel and Nunnenkamp, Peter and Öhler, Hannes, Why it Pays for Aid Recipients to Take Note of the Millennium Challenge Corporation: Other Donors Do! (April 9, 2010). CEGE Discussion Paper No. 99. Available at SSRN: https://ssrn.com/abstract=1586826 or http://dx.doi.org/10.2139/ssrn.1586826

Axel Dreher (Contact Author)

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

HOME PAGE: http://www.axel-dreher.de

Peter Nunnenkamp

University of Kiel ( email )

D-24100 Kiel
Germany

Hannes Öhler

University of Goettingen (Gottingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

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