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

Dreher, Axel; Eichenauer, Vera Z.; Gehring, Kai

doi:10.1093/wber/lhw037

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

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Date

2018-06

ISSN

1564-698X

Published

2018-06

Author(s)

Dreher, Axel

Eichenauer, Vera Z.

Gehring, Kai

Abstract

We investigate the effects of short-term political motivations on the effectiveness of foreign aid. Specifically, we test 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. Our 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. We derive two conclusions 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.

Citation

“Dreher, Axel; Eichenauer, Vera Z.; Gehring, Kai. 2018. Geopolitics, Aid, and Growth: The Impact of UN Security Council Membership on the Effectiveness of Aid. World Bank Economic Review. © Published by Oxford University Press on behalf of the World Bank. http://hdl.handle.net/10986/32777 License: CC BY-NC-ND 3.0 IGO.”