Showing papers by "Axel Dreher published in 2015"
TL;DR: This article collected data on Chinese project aid, food aid, medical staff and total aid money to developing countries, covering the 1956-2006 period, to empirically test to what extent self-interests shape China's aid allocation.
Abstract: Foreign aid from China is often characterized as “rogue aid” that is guided by selfish interests alone. We collect data on Chinese project aid, food aid, medical staff and total aid money to developing countries, covering the 1956–2006 period, to empirically test to what extent self-interests shape China's aid allocation. While political considerations shape China's allocation of aid, China does not pay substantially more attention to politics compared to Western donors. What is more, China's aid allocation seems to be widely independent of recipients' endowment with natural resources and institutional characteristics. Overall, denoting Chinese aid as “rogue aid” seems unjustified.
176 citations
TL;DR: In this paper, the authors propose to measure political importance using temporary membership on the United Nations Security Council and analyze a newly available dataset on the level of conditionality attached to (a maximum of) 314 IMF arrangements with 101 countries over the 1992 to 2008 period.
Abstract: Bailouts sponsored by the International Monetary Fund (IMF) are famous for their conditionality: in return for continued installments of desperately needed loans, governments must comply with austere policy changes. Many have suggested, however, that politically important countries face rather weak stringency. Obstacles to testing this hypothesis include finding a measure of political importance that is not plagued by endogeneity and obtaining data on IMF conditionality. We propose to measure political importance using temporary membership on the United Nations Security Council and analyze a newly available dataset on the level of conditionality attached to (a maximum of) 314 IMF arrangements with 101 countries over the 1992 to 2008 period. We find a negative relationship: Security Council members receive about 30 percent fewer conditions. This suggests that the major shareholders of the IMF trade softer conditionality in return for political influence over the Security Council.
102 citations
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TL;DR: This article used geocoded data for World Bank aid to a maximum of 2,221 first-level administrative regions (ADM1) and 54,167 second-Level administrative regions in 130 countries over the 2000-2011 period, and found significant correlations between aid and growth in ADM2 regions, but no causal effects.
Abstract: This paper brings the aid effectiveness debate to the sub-national level. We hypothesize the non-robust results regarding the effects of aid on development in the previous literature to arise due to the effects of aid being insufficiently large to measurably affect aggregate outcomes. Using geocoded data for World Bank aid to a maximum of 2,221 first-level administrative regions (ADM1)and 54,167 second-level administrative regions (ADM2) in 130 countries over the 2000-2011period, we test whether aid affects development, measured as nighttime light growth. Our preferred identification strategy exploits variation arising from interacting a variable that indicates whether or not a country has passed the threshold for receiving IDA's concessional aid with a recipient region's probability to receive aid, in a sample of 478 ADM1 regions and almost 8,400ADM2 regions from 21 countries. Controlling for the levels of the interacted variables, the interaction provides a powerful and excludable instrument. Overall, we find significant correlations between aid and growth in ADM2 regions, but no causal effects.
64 citations
TL;DR: In this article, the importance of geo-strategic and commercial motives for the allocation of German aid to 138 countries over the 1973-2010 period was investigated, and it was shown that geo-striches were at least as strong under the socialist leadership.
Abstract: We investigate the importance of geo-strategic and commercial motives for the allocation of German aid to 138 countries over the 1973–2010 period. We find that geo-strategic and commercial motives matter. When we relate them to the political color of the German government in general, and the Ministry for Economic Cooperation and Development and the Federal Foreign Office in particular, we find their importance to be at least as strong under the socialist leadership. Socialist leadership decreases the amount of aid commitments, controlled for other factors.
55 citations
TL;DR: This paper found that aid tends to be less effective when political ideology differs between the donor and the recipient, and that political misalignment between donor and recipient governments may render aid less effective by adding to transaction costs and giving rise to incentive problems.
53 citations
TL;DR: The authors investigate whether donors give more aid to countries with larger gender gaps in education, health, or women's rights, and whether they reward improvements in those indicators, and they find some evidence that high gender gaps are associated with higher allocation of aid in those sectors and aid overall.
42 citations
TL;DR: In this paper, the authors used geo-coded data for World Bank aid to a maximum of 2,221 first level administrative regions (ADM1) and 54,167 second-level administrative regions in 130 countries over the 2000-2011 period, to test whether aid affects development, measured as nighttime light growth.
Abstract: This paper brings the aid effectiveness debate to the sub-national level. We hypothesize the non-robust results regarding the effects of aid on development in the previous literature to arise due to the effects of aid being insufficiently large to measurably affect aggregate outcomes. Using geo-coded data for World Bank aid to a maximum of 2,221 first-level administrative regions (ADM1) and 54,167 second-level administrative regions (ADM2) in 130 countries over the 2000-2011 period, we test whether aid affects development, measured as nighttime light growth. Our preferred identification strategy exploits variation arising from interacting a variable that indicates whether or not a country has passed the threshold for receiving IDA’s concessional aid with a recipient region’s probability to receive aid, in a sample of 478 ADM1 regions and almost 8,400 ADM2 regions from 21 countries. Controlling for the levels of the interacted variables, the interaction provides a powerful and excludable instrument. Overall, we find significant correlations between aid and growth in ADM2 regions, but no causal effects. Acknowledgements: This paper is part of a research project on macroeconomic policy in low-income countries supported by the U.K. Department for International Development (DFID). The views expressed in this paper are those of the authors and do not necessarily represent those of the IMF, IMF policy, or DFID. We thank Andrea Presbitero, seminar participants at the Development Research Group meeting at the University of Goettingen, the Conference on Financing for Development (Geneva 2015), and the Centre for the Studies of African Economies Conference (Oxford 2015) for helpful comments, and Jamie Parsons for proofreading.
32 citations
TL;DR: In this paper, the authors argue that membership in specific international organizations (IOs) is an important determinant of foreign direct investment (FDI) inflows, and that membership restricts a country from pursuing policies that are harmful to investors.
30 citations
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TL;DR: In this article, the authors used geo-coded data for World Bank aid to a maximum of 2,221 first-level administrative regions (ADM1) and 54,167 second-level geographical administrative regions(ADM2) in 130 countries over the 2000-2011 period to test whether aid affects development, measured as nighttime light growth.
Abstract: This paper brings the aid effectiveness debate to the sub-national level. We hypothesize the non-robust results regarding the effects of aid on development in the previous literature to arise due to the effects of aid being insufficiently large to measurably affect aggregate outcomes. Using geo-coded data for World Bank aid to a maximum of 2,221 first-level administrative regions (ADM1) and 54,167 second-level administrative regions (ADM2) in 130 countries over the 2000-2011 period, we test whether aid affects development, measured as nighttime light growth. Our preferred identification strategy exploits variation arising from interacting a variable that indicates whether or not a country has passed the threshold for receiving IDA's concessional aid with a recipient region's probability to receive aid, in a sample of 478 ADM1 regions and almost 8,400 ADM2 regions from 21 countries. Controlling for the levels of the interacted variables, the interaction provides a powerful and excludable instrument. Overall, we find significant correlations between aid and growth in ADM2 regions, but no causal effects.
22 citations
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TL;DR: This article used an excludable instrument to test the effect of foreign aid on economic growth in a sample of 96 recipient countries over the 1974-2009 period and found no significant effect of aid on growth in the overall sample.
Abstract: We use an excludable instrument to test the effect of foreign aid on economic growth in a sample of 96 recipient countries over the 1974-2009 period. We interact donor government fractionalization with a recipient country’s probability of receiving aid. The results show that fractionalization increases donors’ aid budgets, representing the over-time variation of our instrument, while the probability of receiving aid introduces variation across recipient countries. Controlling for country- and period-specific 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 no significant effect of aid on growth in the overall sample. We also investigate the effect of aid on consumption, savings, and investments, and split the sample according to the quality of economic policy, democracy, and the Cold War period. With the exception of the post-Cold War period (where abundant aid reduces growth), we find no significant effect of aid on growth in any of these sub-samples. None of the other outcomes are affected by aid.
20 citations
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TL;DR: This article investigated whether China's foreign aid is particularly prone to capture by political leaders of aid-receiving countries and found that when leaders hold power their birth regions receive substantially more funding from China than other subnational regions.
Abstract: This article investigates whether China's foreign aid is particularly prone to capture by political leaders of aid-receiving countries. We examine whether more Chinese aid is allocated to the birth regions of political leaders and regions populated by the ethnic groups to which leaders belong, controlling for indicators of need and various fixed effects. We have collected data on 117 African leaders' birthplaces and ethnic groups and have geocoded 1,650 Chinese development finance projects across 3,097 physical locations that were committed to Africa over the 2000{2012 period. Our econometric results show that when leaders hold power their birth regions receive substantially more funding from China than other subnational regions. We also find -less robust- evidence that African leaders direct more Chinese aid to areas populated by individuals who share their ethnicity. However, when we replicate the analysis for the World Bank, our regressions show no evidence of favoritism. We also evaluate the impact of Chinese aid on regional development, exploiting time variation in the amount of Chinese aid that results from China's production of steel and geographical variation in the probability that a subnational region will receive such aid. We find that Chinese aid improves local development outcomes, as measured by per-capita nighttime light emissions at the first and second subnational administrative level. We therefore conclude that China's foreign aid program has both distributional and developmental consequences for Africa.
TL;DR: In this article, the role of information transmission and misaligned interests across levels of government in explaining variation in the degree of decentralization across countries is explored within a two-sided incomplete information principal-agent framework.
Abstract: This paper explores the role of information transmission and misaligned interests across levels of government in explaining variation in the degree of decentralization across countries. Within a two-sided incomplete information principal-agent framework, it analyzes two alternative policy-decision schemes — ‘decentralization’ and ‘centralization’ — when ‘knowledge’ consists of unverifiable information and the quality of communication depends on the conflict of interests between the government levels. It is shown that, depending on which level of policy decision making controls the degree of decentralization, the extent of misaligned interests and the relative importance of local and central government knowledge affects the optimal choice of policy-decision schemes. The empirical analysis shows that countries’ choices depend on the relative importance of their private information and the results differ significantly between unitary and federal countries.
TL;DR: This article used geocoded data for World Bank aid to a maximum of 2,221 first level administrative regions (ADM1) and 54,167 second-level administrative regions in 130 countries over the 2000-2011 period to test whether aid affects development, measured as nighttime light growth.
Abstract: This paper brings the aid effectiveness debate to the sub-national level. We hypothesize the nonrobust results regarding the effects of aid on development in the previous literature to arise due to the effects of aid being insufficiently large to measurably affect aggregate outcomes. Using geocoded data for World Bank aid to a maximum of 2,221 first-level administrative regions (ADM1) and 54,167 second-level administrative regions (ADM2) in 130 countries over the 2000-2011 period, we test whether aid affects development, measured as nighttime light growth. Our preferred identification strategy exploits variation arising from interacting a variable that indicates whether or not a country has passed the threshold for receiving IDA's concessional aid with a recipient region's probability to receive aid, in a sample of 478 ADM1 regions and almost 8,400 ADM2 regions from 21 countries. Controlling for the levels of the interacted variables, the interaction provides a powerful and excludable instrument. Overall, we find significant correlations between aid and growth in ADM2 regions, but no causal effects.
TL;DR: In this paper, the authors show that the methods used by LMT are unsuitable and rely on similarly problematic data-handling procedures, and explain why they disagree with LMT's critique of their econometric method and show that their results do not depend on our way of dealing with missing data.
TL;DR: In this paper, the impact of fragmentation on aid effectiveness in the context of growth, bureaucratic policy, and education is investigated, focusing on a number of conceptually different indicators of fragmentation, and paying attention to potentially heterogeneous effects across countries.
Abstract: Aid fragmentation is widely recognized as being detrimental to development outcomes. We re-investigate the impact of fragmentation on aid effectiveness in the context of growth, bureaucratic policy, and education, focusing on a number of conceptually different indicators of fragmentation, and paying attention to potentially heterogeneous effects across countries. Our results demonstrate the lack of robustness and any systematic pattern. This stresses the importance of questioning the sweeping conclusions drawn by much of the previous literature.
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TL;DR: In this article, the authors compare Principal Component Analysis (PCA) and Partial Least Squares (PLS) methods to generate weights for composite indices and find that PLS can generate weights that differ substantially from those obtained with PCA, increasing the composite indices' predictive performance for the outcome variable considered.
Abstract: In this paper, we compare Principal Component Analysis (PCA) and Partial Least Squares (PLS) methods to generate weights for composite indices. In this context we also consider various treatments of non-metric variables when constructing such composite indices. Using simulation studies we find that dummy coding for non-metric variables yields satisfactory performance compared to more sophisticated statistical procedures. In our applications we illustrate how PLS can generate weights that differ substantially from those obtained with PCA, increasing the composite indices' predictive performance for the outcome variable considered.