Download this Paper Open PDF in Browser

Geopolitics, Aid, and Growth: The Impact of Un Security Council Membership on the Effectiveness of Aid

60 Pages Posted: 27 Jul 2016  

Axel Dreher

University of Heidelberg

Vera Z. Eichenauer

University of Heidelberg

Kai Gehring

University of Zurich - Chair of Political Economy; University of Heidelberg

Date Written: July 26, 2016

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.

Keywords: Economic Theory & Research, Industrial Economics, Economic Growth

Suggested Citation

Dreher, Axel and Eichenauer, Vera Z. and Gehring, Kai, Geopolitics, Aid, and Growth: The Impact of Un Security Council Membership on the Effectiveness of Aid (July 26, 2016). World Bank Policy Research Working Paper No. 7771. Available at SSRN: https://ssrn.com/abstract=2814787

Axel Dreher (Contact Author)

University of Heidelberg ( email )

Grabengasse 1
Heidelberg, 69117
Germany

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

Vera Z. Eichenauer

University of Heidelberg ( email )

Bergheimerstrasse 58
Heidelberg, 69117
Germany

Kai Gehring

University of Zurich - Chair of Political Economy ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland
+4917620916056 (Phone)

HOME PAGE: http://www.kai-gehring.net

University of Heidelberg ( email )

Grabengasse 1
Heidelberg, 69117
Germany

Paper statistics

Downloads
33
Abstract Views
200