American Economic Review: Vol. 102 No. 7 (December 2012)


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Political Aid Cycles

Article Citation

Faye, Michael, and Paul Niehaus. 2012. "Political Aid Cycles." American Economic Review, 102(7): 3516-30.

DOI: 10.1257/aer.102.7.3516


Researchers have scrutinized foreign aid's effects on poverty and growth, but anecdotal evidence suggests that donors often use aid for other ends. We test whether donors use bilateral aid to influence elections in developing countries. We find that recipient country administrations closely aligned with a donor receive more aid during election years, while those less aligned receive less. Consistent with our interpretation, this effect holds only in competitive elections, is absent in US aid flows to non-government entities, and is driven by bilateral alignment rather than incumbent characteristics.

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Faye, Michael (New York NY)
Niehaus, Paul (U CA, San Diego)

JEL Classifications

D72: Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
F35: Foreign Aid
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
O19: International Linkages to Development; Role of International Organizations

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