In this paper, joint with Scott Strickland (former MA student doing a joint MA between Economics and IDS at the University of Guelph), we ask the question whether donor countries increase levels of aid just before elections. We find yes and no. Donors don’t increase overall aid, or more specifically ODA, but they increase humanitarian aid in the year before elections. We believe that this result makes sense as humanitarian aid efforts are typically supported over the full range of the political spectrum. We establish a causal relationship between elections and humanitarian aid allocations as we focus on countries with fixed election dates. The paper on election cycles can be found here.
Election Cycles and the Allocation of Humanitarian Aid: Paper published in the European Economic Review
The paper (joint with Luc Moers) entitled “Donor Competition for Aid Impact, and Aid Fragmentation” appeared today as an IMF Working Paper (WP/12/204). To download the paper click here.
Aid is highly fragmented: In 2009 a total of 142 developing countries receives a positive amount of gross aid. Among the bilateral donors, Japan disbursed about 11 billions US$ to 140 of the 142 aid-recipient countries, the US about 18 to 138, Canada 1.9 to 137, Germany 5.8 to 136, France 4.9 to 129, and the UK 4.6 to 127 (see graph). Thus, large donors and some of the smaller donors are everywhere! In this paper (for the paper click here) we ask the question: Why is foreign aid so fragmented? The answer we propose is that aid is fragmented because donors compete for aid impact.
An important reason for giving foreign aid is that it may help to foster economic development in the recipient country. Less developed countries are characterized by low income, and this results in low levels of savings and investments. Wealthy countries may therefore be able to help the poorer countries by providing financial assistance, that is, funds to make capital investments. But will foreign aid really be used for investments? If there is some truth to the permanent income hypothesis, then aid that is more permanent in its nature should be consumed rather than invested. This yields in our view an interesting prediction: Aid that is temporary will affect growth rates, while aid that is more permanent will not. In this paper (for the paper click here) we investigate this prediction. We find the following: