How Do Political Changes Influence U.S. Bilateral Aid Allocations? Evidence from Panel Data
by Robert K. Fleck and Christopher Kilby (February 2005; Revised June 2005)
This paper examines the role of U.S. domestic politics in the allocation of foreign aid using panel data on aid to 119 countries from 1960 to 1997. Employing proxies for four aid allocation criteria (development concerns, strategic importance, commercial importance, and the degree of democratization), we find evidence that each influences aid allocation, although the evidence is stronger for some criteria (development concerns, commercial importance) than for others (strategic importance, degree of democratization). Furthermore, the allocation pattern depends on the composition of the U.S. government. When the president and Congress are liberal, development concerns receive more weight in the allocation process than when the president and/or Congress are more conservative. When the Congress is more conservative, commercial concerns have more weight than when the Congress is liberal. These findings have practical importance in light of current attempts to overhaul the allocation of both bilateral and multilateral aid.
JEL codes: D78, F35, O19, P45
Published: The Review of Development Economics, May 2006, 10(2):210-23.