Political power and aid tying practices in the development assistance committee countries

Pincin, Jared (2012): Political power and aid tying practices in the development assistance committee countries.

Abstract

Using a panel of 22 OECD Development Assistance Committee countries over the 1979-2009 period, this paper examines the link between donor-political institutional features, particularly the fragmentation of executive power and the degree of competition in the legislative branch of government, and the share of tied aid in the aid budget of a donor. The empirical results show tied aid, both in levels and as a percentage of total aid, increases as the number of decision makers within the governing coalition increases and decreases as the proportion of excess seats a governing coalition holds above a simple majority increases.

• Item Type: MPRA Paper
• Language: English
• Keywords: Official Development Assistance (ODA); tied aid; fragmented government; political economy
• Subjects: F - International Economics > F3 - International Finance > F35 - Foreign Aid

References

ActionAid International. (2005). Real Aid: Making Technical Assistance Work. Johannesburg.

Alesina, A., & Perotti, R. (1999). Budget Deficits and Budget Institutions. In J. Poterba and J.von Hagen (9th ed.). Fiscal Institutions and Fiscal Performance. Chicago: University of Chicago Press.

Arellano, C., Bulir, A., Lane, T., & Lipschitz, L. (2009). The Dynamic Implications of Foreign Aid and Its Variability. Journal of Development Economics, 88(1), 87-102.

Aryeetey, E., Osei, B., & Quartey, P. (2003). Does Tying Aid Make it More Costly? A Ghanaian Case Study. Institute of Statistical, Social, and Economic Research. University of Ghana.

Baffour, O. (2004). The cost of Aid Tying to Ghana. AERC Research Paper 144. African Economic Research Consortium.

Barrett, C., & Maxwell, D. (2005). Food Aid after Fifty Years. Routledge, London.

Berthelemy, J.C., & Tichit, A. (2004). Bilateral Donors’ Aid Allocation Decisions: A Three-Dimensional Panel Analysis. International Review of Economics and Finance, 13(3), 963-977.

Bertoli, S., Cornia, G., & Manaresi, F. 2008. Aid Effort and Its Determinants: A Comparison of the Italian Performance with Other OECD Donors. University of Firenze. Working Paper.

Boone, P. (1996). Politics and the Effectiveness of Foreign Aid. European Economic Review, 40, 289- 330.

Clay, E., Geddes, M., Luisa, N., & te Velde, D. (2008). The Developmental Effectiveness of Untied Aid: Evaluation of the Implementation of the Paris Declaration and of the 2001 DAC Recommendation on Untying ODA to the LDCs, Phase I Report. Copenhagen.

Dreher, A., & Sturm, J. (2006). Do IMF and World Bank Influence Voting in the UN General Assembly? KOF Working Paper 137. ETH Zurich.

Easterly, W. (2002). The Cartel of Good Intentions: The Problem of Bureaucracy in Foreign Aid. The Journal of Policy Reform, 5(4), 223-250.

Feeny, S., & Mcgillivray, M. (2004). Modelling Inter-temporal Aid Allocation: A New Application with an Emphasis on Papua New Guinea. Oxford Development Studies, 32(1):101-118.

Fleck, R.K., & Kilby, C. (2006). How Do Political Changes Influence US Bilateral Aid Allocations? Evidence from Panel Data. Review of Development Economics, 10(2), 210-223.

Gates, S., & Hoefller, A. (2004). Global Aid Allocation: Are Nordic Donors Different? Working Paper. The Centre for the Study of African Economies Working Paper Series.

Gounder, R. (1999). Modelling of Aid Motivation Using Time Series Data: The case of Papua New Guinea. Oxford Development Studies, 27(2): 233-250.

Harrigan, J., Wang, C., & El-Said, H. (2006). The Economic and Political Determinants of IMF and World Bank Lending in the Middle East and North Africa. World Development, 34(2), 247-270.

Hendra, J. (1987). Only Fit to be Tied: A Comparison of the Canadian Tied Aid Policy with the Tied Aid Policies of Sweden, Norway, and Denmark. Canadian Journal of Development Studies, 8(2), 261 – 281.

Hermes, N., & Lensink, R. (2001). Changing the Conditions for Development Aid: A New Paradigm? The Journal of Development Studies, 37(6), 1-16.

Hopkins, R. F. (2000). Political Economy of Foreign Aid. In Finn Tarp (ed.) Foreign Aid and Development: Lessons Learnt and Directions for the Future. New York: Routledge.

Jepma, C. J. (1991). The Tying of Aid. Development Centre of the Organization for Economic Co- Operation and Development. Washington, D.C.

Judson, R.A., & Owen, A.L. (1999). Estimating Dynamic Panel Models: A Guide for Macroeconomists. Economic Letters, 65, 9-15.

Kiviet, J. (1995). On Bias, Inconsistency, and Efficiency of Various Estimators in Dynamic Panel Data Models. Journal of Econometrics, 68(1), 53-78.

Lahiri, S., & Raimondos-Moller, P. (2000). Lobbying by Ethnic Groups and Aid Allocation. The Economic Journal, 110(462) Conference Papers: C62-C79.

Lahiri, S., & Raimondos-Moller, P. (2004). Donor Strategy Under the Fungibility of Foreign Aid. Economics and Politics, 16(2), 213-231.

Melito, T. (2009). International Food Assistance: Local and Regional Procurement Can Enhance the Efficiency of US Food Aid, But Challenges May Constrain Its Implementation. Government Accountability Office. Washington, D.C.

Milner, H., Tingley, D. (2009). The Political Economy of U.S. Foreign Aid: American Legislators and the Domestic Politics of Foreign Aid. Economics and Politics, 22(2), 200-232.

Murshed, M., & Sen, S. (1995). Aid Conditionality and Military Expenditure Reduction in Developing Countries: Models of Asymmetric Information. Economic Journal, 105(429), 498 – 509.

Neumayer, E. (Ed.). (2003). The Pattern of Giving Aid: The Impact of Good Governance on Development Assistance (Vol. 34). New York: Rutledge Studies in Development Economics.

Nickell, S. (1981). Biases in Dynamic Models with Fixed Effects. Econometrica, 49(6), 1417-1426.

Nowak-Lehman, D., Martinez-Zarzoso, I., & Klasen, S. (2008). Aid and Trade – A Donor’s Perspective. Discussion Paper 171. Ibero-America Institute of Economic Research. Gottingen.

Osei, B. (2003). How Tied Aid Affects the cost of Aid-Funded Projects in Ghana. African Economic Research Consortium. AERC Research Paper 137. Nairobi.

Osei, R., Morrissey, O., & Lloyd, T. (2004). The Nature of Aid and Trade Relationships. European Journal of Development Research, 16(2), 354 – 374.

Quartey, P. (2005). Innovative Ways of Making Aid Effective in Ghana. Research Paper No. 2005/5., World Institute for Development Economics Research.

Pallage, S., & Robe, M. (2001). Foreign Aid and the Business Cycle. Review of International Economics, 9(4), 641-672.

Perotti, R.,& Kontopoulos, Y. (1999). Fragmented Fiscal Policy. In J. Poterba and J. von Hagen (9th ed). Fiscal Institutions and Fiscal Performance. Chicago: University of Chicago Press.

Radelet, S. (2006). A Primer on Foreign Aid. Center for Global Development. Working Paper Number 92.

Roodman, D. (2006). How to Do Xtabond2: An Introduction to “Difference” and “System” GMM in Stata. Center for Global Development. Working Paper Number 103.

Roubini, N., & Sachs, J. (1989). Political and Economic Determinants of Budget Deficits in the Industrial Democracies. European Economic Review, 33, 903-938.

Round, J., & Odedokun, M. (2004). Aid Efforts and its Determinants. International Review of Economics and Finance, 13(3), 293 – 309.

Ruttan, V.W. (1996). United States Development Assistance Policy: The Domestic Politics of Foreign Economic Aid. Baltimore: John Hopkins University Press.

Schraeder, P.J., Hook, S.W., & Taylor, B. (1998). Clarifying the Foreign Aid Puzzle: A Comparison of American, Japanese, French, and Swedish Aid Flows. World Politics, 50(2), 284-323.

Senanayake, H. (2010). Is Untying Aid the only Solution to the Problem of Tied Aid? Asian Journal of Public Affairs, 4(1), 57-73.

Sowa, N., & White, H. (1997). An Evaluation of Netherlands Co-financing of World Bank Activities in Ghana. The Hague: Policy and Operations Department. Ministry of Foreign Affairs.

Svensson, J. (2000). Foreign Aid and Rent Seeking. Journal of International Economics, 51(2), 437-461.

Svensson, J. (2003). Why Conditional Aid Does Not Work and What Can Be Done About It. Journal of Development Economics, 70(2), 381-402.

Tajoli, L. (1999). The Impact of Tied Aid on Trade Flows between Donor and Recipient Countries. The Journal of International Trade and Economic Development, 8(4), 373-388.

Therien, J. (2002). Debating Foreign Aid: Right Versus Left. Third World Quarterly, 23(3), 449- 466.

Villanger, E. (2004). Company Influence on Foreign Aid Disbursement: Is Conditionality Credible When Donors Have Mixed Motives? Southern Economic Journal, 71(2),334-351.

Volkerink, B., & De Haan, J. (2001). Fragmented Government Effects on Fiscal Policy: New Evidence. Public Choice, 109, 221-242.

Wagner, D. (2003). Aid and Trade – An Empirical Study. Journal of the Japanese and International Economics, 17(2), 153-173.

Weingast, B., Shepsle, K., & Johnsen, C. (1981). The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics. The Journal of Political Economy, 89(4), 642- 664.

Williams, G., Jones, S., & Amber, V. (2003). A Vision for the Future of Technical Assistance in the International System. Oxford: Oxford Policy Management.

Wooldridge, J. (2006). Introductory Econometrics: A Modern Approach. Mason: Thomson South- Western.

World Bank. (1998). Assessing Aid: What Works, What Doesn’t, and Why. Washington, D.C. The World Bank.

Zimmerman, R.F. (1993). Dollars, Diplomacy, and Dependency: Dilemmas of U.S. Economic Aid. Boulder: Rienner Publishers.