This paper investigates the question of whether corruption might 'grease the wheels' of an economy. We investigate whether and to what extent the impact of regulations on entrepreneurship is ...dependent on corruption. We first test whether regulations robustly deter firm entry into markets. Our results show that the existence of a larger number of procedures required to start a business, as well as larger minimum capital requirements are detrimental to entrepreneurship. Second, we test whether corruption reduces the negative impact of regulations on entrepreneurship in highly regulated economies. Our empirical analysis, covering a maximum of 43 countries over the 2003-2005 period, shows that corruption facilitates firm entry in highly regulated economies. For example, the 'greasing' effect of corruption kicks in at around 50 days required to start a new business. Our results thus provide support for the 'grease the wheels' hypothesis.
We use an excludable instrument to test the effect of bilateral foreign aid on economic growth in a sample of 97 recipient countries over the 1974–2013 period. Our instrument interacts donor ...government fractionalization with a recipient country’s probability of receiving aid. The results show that fractionalization increases donors’aid budgets, representing the variation over time of our instrument, while the probability of receiving aid introduces variation across recipient countries. Controlling for countryand period-specific fixed effects that capture the levels of the interacted variables, the interaction provides a powerful and excludable instrument. Making use of the instrument, our results show a positive but insignificant effect of aid on growth. We also investigate the effect of aid on consumption, savings, investments and net exports and investigate heterogeneity according to the quality of economic policy, democracy and the Cold War period. We find that aid increases investment and consumption, while it decreases net exports. In no regression do we find that aid affects growth. However, the coefficients from the instrumental variables regressions are also not statistically different from the positive and significant OLS estimates.
À l’aide d’un instrument exclusif, nous évaluons l’impact de l’aide étrangère bilatérale sur la croissance économique d’un échantillon de 97 pays bénéficiaires entre 1974 et 2013. Notre instrument met en interaction le fractionnement de l’aide apportée par les gouvernements contributeurs et la probabilité qu’un pays bénéficiaire puisse recevoir de l’aide extérieure. Les résultats suggèrent qu’en matière d’aide, le fractionnement entraîne une augmentation des budgets des pays contributeurs, constituant ainsi la variable dans le temps de notre instrument. La probabilité de recevoir de l’aide, quant à elle, introduit la variable parmi les pays bénéficiaires. Cette mise en interaction, tenant compte des effets fixes spécifiques au niveau des pays et des périodes, et reflétant le niveau des variables dépendantes, offre un outil puissant et exclusif. Grâce à cet instrument, nos résultats indiquent que l’aide extérieure exerce une relation positive mais négligeable sur la croissance. Dans cet article, nous étudions également l’effet de l’aide étrangère sur la consommation, l’épargne, l’investissement et les exportations nettes, ainsi que l’hétérogénéité à l’aune de la qualité des politiques économiques, du niveau démocratique et de la période de guerre froide. Nous constatons que l’aide étrangère permet d’augmenter l’investissement et la consommation, mais à tendance à diminuer les exportations nettes. Hors modèle de régression, nous constatons que l’aide extérieure exerce une incidence sur la croissance. Néanmoins, les coefficients issus des régressions à variables instrumentales ne sont pas statistiquement différents des estimations positives et significatives réalisées par la méthode des moindres carrés ordinaire.
We investigate whether foreign aid affects refugee flows from recipient countries. Combining refugee data on 141 origin countries over the 1976–2013 period with bilateral Official Development ...Assistance data, we estimate the causal effects of a country’s aid receipts on both total refugee flows to the world and flows to donor countries. The interaction of donor-government fractionalization and a recipient country’s probability of receiving aid provides a powerful and excludable instrumental variable (IV) when we control for country- and time-fixed effects that capture the levels of the interacted variables. Though our IV results suggest that aid induces recipient governments to encourage the return of their citizens, we find no evidence that aid reduces worldwide refugee outflows or flows to donor countries in the short term. However, we observe long-run effects after four three-year periods, which appear to be driven by lagged positive effects of aid on growth.
The Alma Mater effect Dreher, Axel; Yu, Shu
Public choice,
10/2020, Volume:
185, Issue:
1/2
Journal Article
Peer reviewed
We study whether national leaders’foreign education influences their voting behavior at the United Nations General Assembly. We hypothesize that “affinity”—preexisting or developed while studying ...abroad—makes leaders with foreign educations more likely to vote with their host country. At the same time, such leaders need to show sufficient distance from their host country and demonstrate “allegiance” to their own, which will reduce voting coincidences. To test that theory we make use of data on the educational backgrounds of 831 leaders and the voting affinities between the countries they govern and those in which they studied. Over the 1975–2011 period, we find that foreign-educated leaders are less likely to vote in line with their host countries, but more likely to vote in line with (other) G7 countries. We identify the causal effect of “allegiance” by investigating the differential effect of foreign education on voting in preelection years compared to other years. The difference-in-differences-like results show that G7-educated leaders vote less frequently in line with their host countries when facing an election. Overall, both “allegiance” and “affinity” affect foreign policy.
Major DAC donors are widely criticized for weak targeting of aid, selfish aid motives, and insufficient coordination. The emergence of an increasing number of new donors may further complicate the ...coordination of international aid efforts. At the same time, it is open to question whether new donors (many of which were aid recipients until recently) are more altruistic and provide better targeted aid according to need and merit. Project-level data on aid by new donors, as collected by the AidData initiative, allow for empirical analyses comparing the allocation behavior of new
versus old donors. We employ Probit and Tobit models and test for significant differences in the distribution of aid by new and old donors across recipient countries. We find that, on average, new donors care less for recipient need than old donors. New and old donors behave similarly in several respects, however. They disregard merit by not taking the level of corruption in recipient countries into account. Concerns that commercial self-interest distorts the allocation of aid seem to be overblown for both groups.
We investigate whether foreign aid from China is prone to political capture in aid-receiving countries. Specifically, we examine whether more Chinese aid is allocated to the birth regions of ...political leaders, controlling for indicators of need and various fixed effects. We collect data on 117 African leaders' birthplaces and geocode 1650 Chinese development projects across 2969 physical locations in Africa from 2000 to 2012. Our econometric results show that political leaders' birth regions receive substantially larger financial flows from China in the years when they hold power compared to what the same region receives at other times. We find evidence that these biases are a consequence of electoral competition: Chinese aid disproportionately benefits politically privileged regions in country-years when incumbents face upcoming elections and when electoral competitiveness is high. We observe no such pattern of favoritism in the spatial distribution of World Bank development projects.
•We study the subnational allocation of Chinese aid in Africa.•We combine information of leaders' birthplaces with geocoded Chinese aid data.•Political leaders' birth regions receive more Chinese aid.•Effects are stronger before executive elections and when elections are competitive.•We find no birth-region bias in the allocation of World Bank aid.
Abstract
Chinese “aid” is a lightning rod for criticism. Policy-makers, journalists, and public intellectuals claim that Beijing uses its largesse to cement alliances with political leaders, secure ...access to natural resources, and create exclusive commercial opportunities for Chinese firms—all at the expense of citizens living in developing countries. We argue that much of the controversy about Chinese “aid” stems from a failure to distinguish between China's Official Development Assistance (ODA) and more commercially oriented sources and types of state financing. Using a new database on China's official financing commitments to Africa from 2000 to 2013, we find that the allocation of Chinese ODA is driven primarily by foreign policy considerations, while economic interests better explain the distribution of less concessional flows. These results highlight the need for better measures of an increasingly diverse set of non-Western financial activities.
This article provides a survey of the aid budget literature and examines the determinants of the development aid efforts of 22 Development Assistance Committee (DAC) members over the 1976–2011 ...period. In fixed effects regressions, we identify aid inertia, per-capita GDP, the creation of an independent aid agency, colonial history, Russian military capacity, peer effects, terror incidents, aid to CEEC/NIS countries, and imports from developing countries as determinants of the Official Development Assistance (ODA)-to-GNI ratio. Excluding donor fixed effects, several variables, including colonial history and the aid agency dummy, are no longer significant; the impact of per-capita GDP gets weaker, while donors’ budget deficits decrease aid effort.
This paper investigates the impact of legalized prostitution on human trafficking inflows. According to economic theory, there are two opposing effects of unknown magnitude. The scale effect of ...legalized prostitution leads to an expansion of the prostitution market, increasing human trafficking, while the substitution effect reduces demand for trafficked women as legal prostitutes are favored over trafficked ones. Our empirical analysis for a cross-section of up to 150 countries shows that the scale effect dominates the substitution effect. On average, countries where prostitution is legal experience larger reported human trafficking inflows.
How do governments choose between bilateral and multilateral foreign policy? We argue that powerful governments can exploit their influence over multilateral organizations to hide domestically ...contentious foreign policies. Applying this argument to international financial flows, we formulate hypotheses on the choice between bilateral and multilateral financing for political purposes. We test them by examining how the United States incentivizes support for decisions on UN Security Council resolutions. Introducing a new data set on 2,530 Security Council decisions between 1946 and 2015, the results show that temporary Security Council members receive more bilateral and multilateral financing only when they support the positions of the United States. The United States uses bilateral aid to incentivize the support of allies and uses its power over the World Bank and the International Monetary Fund to channel multilateral finance to less friendly countries.
PDF
