Researchers have scrutinized foreign aid’s effects on poverty and growth, but anecdotal evidence suggests that donors often use aid for other ends. We test whether donors use bilateral aid to influence elections in developing countries. We find that recipient country administrations closely aligned with a donor receive more aid during election years, while those less aligned receive less. Consistent with our interpretation, this effect holds only in competitive elections, is absent in U.S. aid flows to non-government entities, and is driven by bilateral alignment rather than incumbent characteristics.
That’s the abstract from an important new paper by UC-San Diego economists Michael Faye and Paul Niehaus, forthcoming in American Economic Review. Technically, official development aid (ODA) is supposed to be about promoting economic development and improving popular welfare. Nevertheless, Faye and Niehaus show a strong link between election cycles and aid flows that fits what we would expect if aid were also being used for political ends. In cases where elections are competitive, donors crank up the aid to friendly governments facing tough elections while reducing aid to hostile ones. In cases where elections aren’t competitive, aid flows don’t vary much around elections (why bother, right?). Meanwhile, assistance to non-governmental organizations and opposition groups from the U.S.’s National Endowment for Democracy (NED) follows the same cycles, but the pattern is reversed (albeit not statistically significant): assistance to opposition groups goes down around election time in countries with friendlier governments, and it goes up around election time in countries with more hostile governments.
All in all, it’s a pretty compelling set of results that should put another big dent in the “development aid isn’t political” narrative.
Thanks to NYU’s Cyrus Samii for pointing this paper out on Twitter.