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Trade versus Aid: Donor Generosity in an Era of Globalization

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Abstract

Why do foreign aid budgets vary across countries and over time? Existing research indicates that the same set of factors shapes commitments toward both domestic and international redistribution. While scholars have acknowledged international normative influences on aid allocations, research on levels of donor generosity has not examined how international trade influences aid budgets. This paper examines whether imports from developing countries have a ‘displacement effect’ on aid commitments. Employing a panel of nineteen OECD donor countries, we analyze aid budgets from 1980 to 2000. We find that increased imports from developing countries to donor countries are associated with aid reductions. These results persist after controlling for international and domestic variables identified in previous research, and under other estimation techniques and model specifications. Copyright Springer Science+Business Media LLC 2007

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... We compare this explanation with approaches that were developed for explaining bilateral donors' total amount of aid: the importance of domestic (partisan) politics and institutions (Noel & Therien, 1995;Therien & Noel, 2000;Tingley, 2010); the role of domestic economics and foreign economic policy (e.g., Lundsgaarde, Breunig, & Prakash, 2007;Maizels & Nissanke, 1984); and considerations of foreign and security policy (Bueno de Mesquita & Smith, 2009;Dreher, Sturm, & Vreeland, 2009). We test these claims for 23 donor countries in the period 1960-2010. ...
... Since the 1970s, the determinants of ODA have earned widespread attention (Maizels & Nissanke, 1984;McKinlay & Little, 1979). Most of the quantitative studies focus on the various measures for total expenditures of bilateral or multilateral aid (Alesina & Dollar, 2000;Bueno de Mesquita & Smith, 2009;Lundsgaarde et al., 2007;Neumayer, 2003a;Schraeder, Hook, & Taylor, 1998;Tsoutsoplides, 1991), and only a few also discuss the determinants of poverty orientation (Nunnenkamp & Thiele, 2006;Tingley, 2010). In the literature on total amount of aid different donor motives are related to different causal determinants. ...
... Some authors apply the literature on partisan politics to the field of ODA. They claim that left (or center) governments spend more money on ODA (Noel & Therien, 1995;Tingley, 2010), but others do not find strong partisan effects (Lundsgaarde et al., 2007). Another idea is to relate differences in ODA spending to different domestic welfare states, in as much as these institutions reveal normative or ideological differences (Noel & Therien, 2002;Therien & Noel, 2000). ...
Article
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Donors differ in the amount of official development assistance dedicated to poverty reduction. We investigate the causes of variation over time and donors by employing both a regression approach with aggregate data on bilateral aid and two short country studies on Germany and the United Kingdom. We find that there is a trade-off between the total amount of money given, and the amount of money given to poor countries. The trade-off is similar to the paradox of redistribution of targeting vs. redistribution in rich welfare states. Case-study evidence illustrates how countries have managed this tradeoff.
... However, results are far from conclusive with respect to most of these variables. In fact, the only results that appear to be broadly consistent are that aid flows tends to increase with donor income (Beenstock, 1980;Mosley, 1985;Round and Odedokun, 2004;Chong and Gradstein, 2008;Frot, 2009;Dang et al., 2009;Rymaszewska, 2012) and exhibit a certain degree of path dependence (Mosley, 1985;Boschini and Olofsgard, 2007;Lundsgaarde et al., 2007;Mold et al., 2010;Jones, 2011). ...
... There is also little consensus on the effect of domestic political variables, such as government ideology and pro-poor stance, on aid effort. One school of thought argues that donor countries' generosity in foreign aid is a reflection of the government's humanitarian and egalitarian principles (Lundsgaarde et al., 2007). There is indeed evidence from several studies that aid effort tends to be higher in more egalitarian societies (Round and Odedokun, 2004;Bertoli et al., 2007;Chong and Gradstein, 2008;Dang et al., 2009). ...
... There is indeed evidence from several studies that aid effort tends to be higher in more egalitarian societies (Round and Odedokun, 2004;Bertoli et al., 2007;Chong and Gradstein, 2008;Dang et al., 2009). However, the link between domestic welfare spending and aid appears weak: while Noel and Therien (1995) find a positive correlation between the strength of donor country welfare institutions and aid effort, other studies find that domestic welfare spending does not significantly influence foreign aid spending (Round and Odedokun, 2004;Lundsgaarde et al., 2007). ...
Article
Purpose – The purpose of this paper is to explore the interdependence between donor countries’ health aid expenditures. The specific form of interdependence considered is the leader effect, whereby an influential country has a positive leverage effect on other donor countries’ aid expenditure. The opposite case of a free-rider effect, whereby a single donor country has a negative leverage effect on its peers, is also considered. Design/methodology/approach – Focusing on the identification of the leader effect avoids the estimation bias present in the identification of the peer group effect, due to endogenous social effect. The empirical analysis focuses on Development Assistance for Health provided by 20 OECD countries over the period of 1990-2009. Aid commitment and aid disbursement are distinguished. Findings – When aid dynamics, country heterogeneity, and endogeneity are accounted for, there is no evidence that the biggest donor – the USA, or the most generous donors – Norway and Sweden, exhibit any leverage effects on other donor countries’ aid expenditures. Originality/value – This is the first paper to examine the leader and free-rider effects in health aid provision as previous studies focus on peer effects. Any evidence of leader or free-rider effects (or the lack of it) adds to the understanding of international political economy especially in the area of foreign aid provision.
... Boschini and Olofsgård (2007) In addition to historical factors, the current degree of global engagement of donor countries is likely to shape their aid budgets (hypothesis 9). The number of international organizations in which a donor country is a member, the number of international nongovernmental organizations operating in a donor country, and the KOF Index of Globalization have been proposed as relevant political indicators (Lundsgaarde et al. 2007;Brech and Potrafke 2012). 7 However, there is no empirical evidence that these indicators increase aid budgets. ...
... Previous empirical studies find a positive 7 KOF is the acronym of the Swiss Economic Institute. 8 Alternatively, Lundsgaarde et al. (2007) explain this (non)finding by the fact that more globalized countries transmit ideas in favor and against foreign aid. relationship between government size and aid (Bertoli et al. 2008;Round and Odedokun 2004), whereas conclusive evidence on domestic transfers and social spending as determinants of aid budgets does not exist (Table 1). ...
... As shown by Potrafke (2011), government ideology does not generally affect the composition of government budgets in OECD countries. 10 While Lundsgaarde et al. (2007) do not find empirical support for this proposition, Tingley (2010) finds that aid decreases with the cumulative measure of right-wing party seats. 11 This idea is supported by the empirical analysis in Odedokun (2003, 2004). ...
Article
What determines the foreign aid effort of donor countries? We review the existing literature on donors’ aid budgets and examine which of the suggested variables robustly determine aid effort, measured as Official Development Assistance (ODA) as a share of gross national income. More specifically, we empirically test 16 hypotheses using panel econometric methods for member countries of the Development Assistance Committee (DAC) in the 1976-2008 period. To test for the robustness of our results, we extend our dataset to 48 possible determinants of aid budgets and apply an Extreme Bounds Analysis (EBA). In our fixed effects regressions, we find that aid inertia, the donor country’s GDP per capita, the existence of an independent aid agency, and colonial history have a robust and quantitatively relevant impact on countries’ aid efforts. Among the potential substitutes for aid, remittances exert a robust effect. Excluding year fixed effects, political globalization, Russian military capacity, peer effects, aid effectiveness, and government debt also play a significant role
... Scholarly evidence is mixed on whether the described overall larger support of women for development aid is reflected in legislators' decisions on aid policies. Empirical studies do not show a consistent positive relationship between the strength of female representation in parliament and the size of aid budgets (Breuning, 2001;Lundsgaarde et al., 2007;Olsen-Telles, 2013;Fuchs et al., 2014;Lu and Breuning, 2014;Hicks et al., 2016). ...
... Finally, it might again just be that ministers aim to maximize their budgets independent of their respective political ideology as argued above. While Thérien and Noël (2000) and Tingley (2010) provide evidence for the first argument, Lundsgaarde et al. (2007) find political ideology to be insignificant, and, according to Bertoli et al. (2008) and Dreher et al. (2015b), right-wing governments provide more aid. ...
... Second, we control for (logged) per-capita GDP, trade openness, government expenditure as a share of GDP (data from World Bank, 2014) and the debt-over-GDP ratio (Abbas et al., 2010) to capture the donor country's (international) economic and fiscal situation. Third, we include a donor country's level of political globalization (Dreher, 2006;Dreher et al., 2008) to account for the transmission of ideas through networks of intergovernmental and non-governmental organizations (Lundsgaarde et al., 2007). Fourth, we add a binary variable for the existence of an aid agency in the donor country (Fuchs et al., 2014). ...
Article
Over 300 government members have had the main responsibility for international development cooperation in 23 member countries of the OECD's Development Assistance Committee since the organization started reporting detailed Official Development Assistance (ODA) data in 1967. Understanding their role in foreign aid giving is crucial since their decisions can influence aid effectiveness and thus economic development on the ground. Our study examines whether development ministers’ personal characteristics are associated with aid budgets and aid quality. To this end, we create a novel database on development ministers’ gender, political ideology, prior professional experience in development cooperation, education, and time in office over the 1967–2012 period. Results from fixed-effects panel regressions show that some of the personal characteristics of development ministers matter. Most notably, we find that more experienced ministers with respect to their time in the development office obtain larger aid budgets. Moreover, our results suggest that female ministers as well as officeholders with prior professional experience in development cooperation and a longer time in office provide higher-quality ODA.
... Some bilateral donors and international agencies have already changed part of their allocations in accordance with recipient countries' will and efforts to implement appropriate policies (Dollar and Levin, 2006). But gains in foreign assistance effectiveness may be moderated because aid allocations can also be dependent on donors' characteristics and policies (as suggested by Lundsgaarde et al. (2007), Berthélemy et al. (2009) and Tingley (2010) for example). Donors' policies coherence and interests are possibly decisive concern to understand foreign aid and are presumably relevant for determining the shape of bilateral assistance. ...
... Second, we confirm that commercial interests of donors guide a part of aid allocation: aid flows may be designed to create new trade and market opportunities. Besides, we corroborate the displacement effect found by Lundsgaarde et al. (2007). Bilateral trade deficits in OECD countries reduce the amount of aid allocated. ...
... The positive sign of Exports to developing countries indeed denotes that aid flows reward new market opportunities for donors. Our results are robust to the inclusion of the same variable with a five year lag (see Column (3) in Table 4.2). 12 Furthermore, our findings support the displacement effect found in Lundsgaarde et al. (2007) when we add a measure of Trade Balance (OECD exports to developing countries minus OECD imports from developing countries) designed to capture a "trade not aid" effect (see Column (2) in Table 4.1). The "trade not aid" concept is the idea that the best way to promote economic development is through trade and not through the provision of foreign aid. ...
Article
The objective of this dissertation is to contribute to the existing knowledge about foreign aid, either about its consequences on the developing world or about its implications for developed economies. Chapter 1 shows that aid improves public institutions when aid is allocated by multilateral agencies. The benefits of aid are even more valuable in countries not reliant on their oil resources rents. In Chapter 2 we analyse the possible Granger causal relationships running between foreign aid and corruption in developing countries. Our data reveal that aid does not result in more or less corruption, and reversely corruption does not exert a significant influence on future assistance. In Chapter 3 we evidence that foreign assistance enhances the recipient country's efficiency of production, in particular when the country has democratic and macroeconomic sound institutions. Chapter 4 reports our data analysis on donors' domestic policies. Aid, migration and unemployment policies are recognized to be tightly connected for OECD donors. Specifically, aid policies are partly shaped by the burden of unemployment and the stock of migrants observed in the donor country.
... Additionally, larger developed economies tend to bear a larger historical responsibility towards the climate change problem, and as a result they might exhibit a stronger commitment to providing mitigation finance. This is also in line with earlier work by Mosley (1985) who argues that the governments of larger donor countries often take the lead in supplying more ODA (with small donor countries often free-riding on the aid efforts of the former); Lundsgaarde et al. (2007) provide empirical evidence of such a positive link between donor population size (via social spending) and overall aid generosity (i.e., the share of total aid in GDP). Data on population levels are taken from WDI (2014). ...
... We find positive and statistically significant coefficients for the population size of donor countries (lnpop) and their ratification status of the Kyoto protocol (kyotoprot). Larger donors seem to take the lead in mitigation finance provision (this might reflect an acknowledgment of their relative larger historical responsibility towards the climate change problem or perhaps an easier capacity to raise funds for international environmental projects, see also Mosley, 1985 andLundsgaarde et al., 2007, for similar arguments put forward for general aid provision). Donor countries that ratified the Kyoto protocol also seem to allocate a larger share of aid to mitigation finance. ...
Article
Full-text available
We make use of a panel dataset of 22 donor countries from 1998 to 2009 to examine the links between donor characteristics and the share of overseas development assistance allocated to climate mitigation finance. We find that donors with a larger green domestic budget tend to allocate a smaller portion of overseas aid to mitigation finance (possibly as a result of a competing interest between spending on domestic environmental projects and international climate projects). The opposite holds for donor countries with better institutions (governance) that have ratified the Kyoto Protocol. We also find important discrepancies when comparing the effects of donor characteristics on committed versus disbursed mitigation finance (as a share of aid). For the latter, only commitment to the Kyoto Protocol appears to be of high statistical significance.
... The author has reported the absence of impact of trade openness in donor-countries on their aid supply. Lundsgaarde et al. (2007) have demonstrated empirically that increased imports in a donor country from developing countries are associated with diminishing aid budgets (the amount of aid allocated by donors to recipient-countries). However, this impact has appeared to be "loosely" significant, that is, significant at only the 10% level. ...
... At the same time, Bertoli et al. (2008), Fuchs (2011) andFrot (2009) have shown a mixed positive impact of donor-countries' per capita income on their aid budget supply. Mosley (1985) and Lundsgaarde et al. (2007) have obtained no statistical significance of this impact. ...
Article
This paper complements the literature on the impact of donor-countries' trade on their supply of Official Development Aid relating to the trade sector (ODATRADE). It investigates whether the impact of donor-countries' trade balance (including overall trade balance in goods and services, trade balance in goods vis-à-vis developing and developed countries, and trade balance in services) on ODATRADE depends on the level of donor-countries' output gap. Relying on a sample of 22 donor-countries over the period 1967-2015, the empirical analysis shows that donors' output gap does matter for the impact of trade balance variables on ODATRADE.
... Empirical support for both models has been mixed to date. The claim that aid grows in proportion to deprivation as measured by various indices of quality of life has arguably been one of the most consistent findings in the recipient need model (Berthélemy & Tichit, 2004;Boschini & Olofsgård, 2007), but not all studies support this claim (Lundsgaarde, Breunig & Prakash, 2007). Some scholars suggest that countries with lower per capita GDP tend to receive larger amounts of aid, but others challenge this finding (see Fuchs, Dreher & Nunnenkamp, 2014). ...
... Round & Odedokun (2004) and Berthélemy & Tichit (2004) also detect distinct Cold War and post-Cold War patterns. In contrast, Lundsgaarde, Breunig & Prakash (2007), Clist (2011), and others maintain that aid patterns remained largely stable across the two eras. ...
Article
Full-text available
This article argues that military intervention by traditional members of the OECD’s Development Assistance Committee (DAC) has a significant impact on the development aid given to target states. This seemingly innocuous thesis contributes to two literatures. First is the literature on foreign aid, which examines a long list of donor and recipient state variables to explain assistance patterns. It has yet to analyze the signal that DAC military intervention sends about the importance of specific recipient states, however. Second is the literature on foreign policy substitutability, which maintains that increasing the resources allotted to one change-inducing foreign policy tool often reduces the resources available for other tools. Using interrupted time-series panel-corrected standard error estimates of 120 recipient countries from 1960 to 2004, we find that aid flows from traditional DAC donors rise significantly when one or more of their members dispatch soldiers in support of a target government, but gradually recede after troops depart. The opposite pattern holds for interventions that oppose the target government. These outcomes suggest that studies of foreign aid should consider donor state military actions as an additional explanatory variable, and that policymakers may at times view foreign aid and military intervention as complementary rather than competing foreign policy tools.
... Sabra, (2013) provides an evidence of strong positive relationship between Development Assistance Committee (DAC) countries' exports and their donation to MENA recipient countries. On the other hand, donors imports from recipient countries and their donation are negatively associated, both as a percentage of donors GDP, Lundsgaarde et al. (2007). These evidences prove that trade openness increases ODA flows to the recipient countries. ...
Article
Full-text available
In the era of globalization, international capital inflows increase dramatically, in specific, ODA and FDI. FDI and ODA would increase employment, GDP and government finance. The impact on GDP and government finance is different, and varies between ODA and FDI. The main purpose of this article is to examine the impacts of ODA and FDI on the government size, considering the trade openness, in specific, and country size. We use simultaneous equations and dynamic panel GMM analysis for seven selected middle income MENA countries for the period 2000-2019. Our results show that FDI reduces government size, meanwhile, ODA increases it. Furthermore, openness and country size are associated positively and negatively with the government size, respectively. We concluded that attracting more FDI and guiding ODA for development purposes is highly recommended. In addition, package of reforms and policies have been recommended to realize such purposes.
... However, he does not find empirically a significant effect of this variable on donors' aid supply. Lundsgaarde et al. (2007) showed that the share of donors' imports from developing countries to donors' GDP is significantly and negatively associated with their aid effort. In other words, increased imports in a donor country from developing countries are associated with diminishing aid budgets. ...
Article
This article investigates the impact of fiscal space in donor-countries on their official development aid (ODA) supply. It relies on the indicator of ‘De Facto Fiscal Space’ proposed by Aizenman and Jinjarak (The Fiscal Stimulus of 2009–10: Trade Openness, Fiscal Space and Exchange Rate Adjustment, NBER Working Paper 17427, 2011) and on a panel of 22 donor-countries over the period 1964–2015. The analysis considers four measures of ODA, including the total net aid transfers (NAT), ODA allocated to all sectors in the recipient-countries (ODAALLSECT), ODA allocated to the trade sector and ODA provided for the non-trade sector. The empirical results show that greater fiscal space in donor-countries influences positively donors’ NAT, their ODA allocated to all sectors as well as their ODA allocated to the non-trade sector in recipient-countries. At the same time, greater fiscal space in donor-countries does not influence ODA relating to the trade sector. Furthermore, the impact of fiscal space on ODA supply to the trade and non-trade sectors depends on donor-countries’ level of economic wealth. Jel Classification: E62, F35
... These rationalist theorists regard foreign aid as one of the tools for enhancing strategic and economic influences over recipient countries (Alesina and Dollar 2000;Berthélemy 2004;Breuning 1995;Browne 2006;Maizers and Nissanke 1984;McGillivray 2003;Sogge 2002). For example, there is ample literature in the field of political economy, which delves into the correlation between donor countries' commercial interests vis-à-vis recipient countries in trade relations and the volume of aid mainly in rigorous statistical analyses (Hoeffler and Outram 2011;Lundsgaarde et al. 2007;Berthélemy 2006;Younas 2008). ...
... so find little influence of political ideology. Round and Odedokun (2004) find a relationship between " pro-poor " policies in the donor and subsequent aid budgets, but no influence of a discretized ideology score [−2,2] taken by adding ideological classifications of the executive and legislative branches (Beck, Clarke, Groof, Keefer, & Walsh, 2000). Lundsgaarde, Breunig, & Prakash (2007 focus on the influence of imports from developing countries, but simultaneously enter several party controls such as a cumulative left government measure. They report no significant relationships with this party variable. Chong and Gradstein (2008) find mixed results using a dummy variable for whether the party in control of the executi ...
Article
The vast majority of scholarship on foreign aid looks at either the effectiveness of foreign aid or why particular countries receive aid from particular donors. This paper takes a different approach: what are the domestic sources of support for foreign aid? Specifically, how does the donor's domestic political and economic environment influence ‘aid effort’? This paper uses a time-series cross-sectional data set to analyze the influence of changes in political and economic variables. As governments become more conservative, their aid effort is likely to fall. Domestic political variables appear to influence aid effort, but only for aid to low income countries and multilaterals while aid effort to middle income countries in unaffected. This suggests that models solely emphasizing donor economic and international strategic interests as determinants of donor aid policy may be mis-specified. These results also suggest sources of aid volatility that might influence recipient growth prospects.
... Model 16 employs (logged) SO 2 emissions in grams without being denominated in terms of GDP as the dependent variable. Model 17 employs ODA as a percentage of GDP (Lundsgaarde et al. 2007) instead of ODA per capita. Model 18 employs a stock measure of FDI instead of FDI measured as a flow. ...
Article
This paper explores how trade and foreign direct investment (FDI) condition the effect of foreign aid on environmental protection in aid-recipient countries. We suggest that (1) environmental protection should be viewed as a public good and (2) all else equal, resource flows from abroad (via aid, trade, and FDI) influence governments' incentives to provide public goods. (3) Because these resources shape governments' incentives differently , their interactive effects should be examined. We begin with the assumption that developing country governments seek some optimal level of environmental protection, a level conditioned by their factor-intensive growth phase. We hypothesize that at low levels of export receipts or FDI inflows from the developed world, foreign aid is associated with superior environmental protection. This is because foreign aid, as an environmentally neutral addition to revenue, allows recipient governments to partially relax the trade-off between economic growth and environmental protection. As levels of export receipts or FDI inflows from the developed world increase, however, the salutary effect of foreign aid will diminish and eventually be reversed. This is because foreign aid mitigates the recipient government's dependence on traders and investors in the developed world, and concom-itantly reduces their pro-environmental policy leverage. Our analysis of 88 aid recipients, for the period 1980–2005, lends support to our argument.
... However, the study observes only between-country differences for 2 years (1981 and 1990). Other studies which do not explicitly focus on partisanship and lack sophisticated indicators for ideology and partisanship do not report significant effects for the level of spending on development assistance (Fuchs et al., 2014: 190;Lundsgaarde et al., 2007;Round and Odedokun, 2004). In contrast, Tingley (2010: 45) reports a close relationship between party ideology and foreign aid to least developed countries (see also Allen and Flynn, 2018: 465;Brech and Potrafke, 2014;Greene and Licht, 2018: 296). ...
Article
This article contributes to a growing literature that questions the traditional ‘politics stops at the water’s edge’ paradigm. Left- and right-wing parties hold diverging ideologies and articulate specific party programmes regarding policy priorities in the realm of foreign and security affairs. The impact of partisan contestations over foreign policy priorities can be traced in defence and foreign aid spending. We understand this ‘bomb-or-build’-balance as two sides of a coin which shapes the international posture of democracies. Our quantitative analysis of 21 OECD countries (1988–2014) reveals that the ideological positions of the parties in government influence the relative importance of military expenditures versus foreign aid. The more the ideological position of a government is tilted towards the military (and against internationalism), the more the ‘bomb-or-build’-balance shifts in favour of military spending (and in disfavour of foreign aid).
... It is often assumed that right-wing parties and governments are less supportive of foreign aid than left-wing (Lancaster 2007), which can have implications for aid volatility and aid geographic allocation. Empirical studies on established Western donors brought rather ambiguous or mixed results-regarding the influence of domestic political variables on aid flows, see, for instance, Beck et al. (2001), Round and Odedokun (2004), Lundsgaarde et al. (2007), or Chong and Gradstein (2008). Yet, Fleck and Kilby (2010) found that during the periods of conservative control of the United State Congress, foreign aid programmes were driven more by commercial interest. ...
Article
This paper seeks to bring new insights into the foreign aid allocation behaviour and patterns of two donors from the group of post-communist EU member countries, namely Poland and the Czech Republic. We use quantitative regression analysis to address Polish and Czech foreign aid objectives with a specific emphasis on geopolitical considerations and promotion of democracy. The results reveal a considerable level of similarity between Polish and Czech foreign aid allocation. Both donor countries use foreign aid to safeguard their own geopolitical self-interests—the Czech Republic and especially Poland prioritise post-Soviet countries in their aid allocations. They also prefer recipients in a relative geographic proximity. On the other hand, economic objectives are not significant drivers of Polish and Czech foreign aid. Given the recipients’ needs, the middle-income effects are evident in both countries’ aid allocations. Although support of democracy is an official objective of both donors, the level of democracy and freedom played a statistically significant role only in the allocation of overall Czech aid. A separated analysis on Polish and Czech democracy aid reveals even stronger biases of democracy aid towards former post-Soviet countries. Our research has also acknowledged the need for a more precise definition of democratic assistance.
... Seventh, a few scholars have also considered the extent of the donors' global, social engagement with the rest of the world (Lundsgaarde et al., 2007;Brech and Potrafke, 2014;Paxton and Knack, 2012). To measure such global connectivity at the country level, we use the average of informational, cultural and interpersonal dimensions of the KOF Globalization Index by Dreher (2006) and Gygli et al. (2019), which captures aspects of tourism, access to news, connections to foreign countries, foreign born population, as well as penetration of global brands. ...
Article
Full-text available
Ending global poverty has been at the forefront of the development agenda since the 1970s, but many donors have failed to target their funds toward this goal. Activists have tackled this issue by appealing to donors' humanitarian motives, but we know little about what explains donors' decisions on how much to give to the poorest countries. Drawing from previous literature, we identify potential donor-level determinants of poverty selectivity and evaluate their explanatory power by assessing whether their relationships with selectivity are in the hypothesized directions and generalize beyond a particular dataset. Employing cross-validation and Bayesian Model Averaging, we find few measures of donor motivations provide a generalizable and hypothesized explanation for poverty selectivity. In contrast, donor budget sizes exhibit a relationship that is both hypothesized and externally valid. These results give new light on the conventional approach to determine donor motives and suggest future directions to study foreign aid allocation and donor motives.
... Brech and Potrafke (2014) corroborate this result for aid delivered as bilateral grants, though not for other forms of aid. Partisanship variables proved to be insignificant in the analysis of donors' aid effort by Lundsgaarde et al. (2010). According to some studies, however, the overall aid effort of right-wing governments is even stronger than that of left-wing governments (Bertoli et al., 2007;Goldstein and Moss, 2005;Round and Odedokun, 2004). ...
Article
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.
... Model 16 employs (logged) SO 2 emissions in grams without being denominated in terms of GDP as the dependent variable. Model 17 employs ODA as a percentage of GDP (Lundsgaarde et al. 2007) instead of ODA per capita. Model 18 employs a stock measure of FDI instead of FDI measured as a flow. ...
Article
This paper explores how foreign trade and foreign direct investment (FDI) condition the effect of foreign aid on environmental protection in aid recipient countries. We suggest that (1) environmental protection should be viewed as a public good, and (2) all else equal, resource flows from abroad (via aid, trade and FDI) influence governments’ incentives to provide public goods. (3) Because these resources shape governments’ incentives differently, their interactive effects should be examined. We hypothesize that at low levels of trade and FDI, foreign aid will be associated with superior environmental protection. As trade and FDI levels increase, the effect of foreign aid will diminish and eventually reverse. Our analysis of 88 aid recipients for the period, 1980-2006, lends support to our argument.
... Bilateral donor countries often use " tied aid that requires the recipient country to contract their own firms in providing services. Previous research has also shown that bilateral donors decrease aid allocations to countries that have high levels of exports to the donor country (Lundsgaarde, 2007). To the extent that top bank shareholders influence the allocation of development bank lending, borrowers with special relations with top shareholders are likely to receive more lending and grants. ...
Article
This paper provides an empirical test of whether the Asian Development Bank (ADB) adjusts allocation decisions about environmentally risky projects to reflect borrower environmental performance in previous projects. This type of performance-based decision-making has been repeatedly highlighted as key to achieving favorable development assistance outcomes in a variety of programming areas. I collect recipient environmental performance information from all available post-project evaluations since 1990 and create an indicator of environmental reputation using a Bayesian updating model. I use this environmental reputation indicator to demonstrate that the ADB responds to previous borrower environmental performance when approving environmentally risky projects, but that past environmental performance does not positively influence the allocation of projects with no environmental risks. These results demonstrate that performance-based allocation decisions are possible for development organizations within specific programmatic areas when low performance is a significant risk to the core functions of the organization, which in this case is the ability to approve and disburse lending projects.
... In contrast to Breuning (2005Breuning ( , 2006, who assesses the allocation of total aid across recipient countries, we take aid for education as the dependent variable, arguing that gender inequality in 12 According to Togeby (1994), the gender gap in foreign policy attitudes also implies that women have stronger preferences for international solidarity and, specifically, higher foreign aid than men. 13 Lundsgaarde et al. (2007) introduce female representation in donor parliaments as a control variable in their assessment of the link between donor imports from developing countries and their aid effort. The overall aid effort is not affected by this control variable according to the empirical results of Lundsgaarde et al. ...
Article
Kleibl, Johannes. (2012) Tertiarization, Industrial Adjustment, and the Domestic Politics of Foreign Aid. International Studies Quarterly, doi: 10.1111/j.1468-2478.2012.00754.x © 2012 International Studies Association This paper explains the varying degrees to which commercial interests or recipients’ development needs shape donor governments’ foreign aid allocation decisions. I argue that domestic interest group politics is a major driver of the heterogeneity in donors’ aid allocation policies. As proxy measures of donor governments’ dependence on the political support of industrial producer lobbies and their susceptibility to the demands of development interest groups, I exploit variation in the level of tertiarization and in the intensity of industrial restructuring processes across donor countries and over time. While higher levels of tertiarization increase donor governments’ relative responsiveness to the aid allocation demands of development interest groups, intense periods of industrial adjustment provide incentives for governments to allocate aid in line with the preferences of their industrial producer constituencies. Statistical analyses of a dyadic panel data set of 21 OECD donor and 124 developing recipient countries for the period from 1980 to 2001 support the theoretical predictions.
Article
We examine how donor government ideology influences the composition of foreign aid flows. We use data for 23 OECD countries over the period 1960–2009 and distinguish between multilateral and bilateral aid, grants and loans, recipient characteristics such as income and political institutions, tied and untied aid, and aid by sector. The results show that leftist governments increased the growth of bilateral grant aid, and more specifically grant aid to least developed and lower middle-income countries. Our findings confirm partisan politics hypotheses because grants are closely analogous to domestic social welfare transfer payments, and poverty and inequality are of greatest concern for less developed recipient countries.
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Although the humanitarian sector has gained prominence in the management of contemporary conflicts, data on the diversity of organizations involved in humanitarian aid are scarce and do not rely on well-founded inclusion criteria. This lack of data limits not only our knowledge of humanitarian action but also our understanding of international security and of non-state actors’ role in foreign aid. The Humanitarian Organisations Dataset (HOD) seeks to fill these gaps. Based on clear and reproducible criteria, 2,505 organizations active in the humanitarian sector have been identified while information on their history, nature, activities, and geographical location has been collected. Our analyses depart from prevailing Western-centered accounts of humanitarian, show regional variations in types of organizations, and identify distinct historical patterns by region and by type of organization. They also document a large span of humanitarian activities, going beyond the current exclusive focus on in-kind assistance. We illustrate how the dataset can contribute to further research through its combination with other data and explore the relationship between NGOs and governments in humanitarian aid funding. Beyond its value for scholars, we anticipate that the HOD will also be of interest to policymakers and nonacademic users concerned with humanitarian action and crisis-management issues.
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Bilateral donors have recognized the need to improve the consistency of donors' policies towards developing countries. However, the impact of policy consistency on economic development has not been documented in the literature to date. Our contribution is twofold: firstly, we use the indices provided by the Center for Global Development (CGD) to construct indicators of overall donors' policies performance and donors' policies consistency at the recipient level. Secondly, we assume that the growth‐consistency nexus is dynamic and our results suggest that an increase in consistency by one standard deviation increases growth on average by 1,1 percentage point. This result holds for different instrumentation strategies and robustness checks. We also highlight that the overall policy performance (OPP) increases growth above a sufficient level of donors' policies diversification and level of OPP.
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According to traditional wisdom in the foreign aid community, a donor country's official development assistance policy tends to be influenced by the political regimes' ideology. A progressive government is more likely to be humanitarian in implementing foreign aid, whereas a conservative one is apt to be more strategic and economic-interest oriented. Given South Korea's regime change between conservatives and progressives from the Roh Tae-woo (1988) to the Lee Myung-bak (2012) administrations, this article attempts to identify shifts in South Korea's aid allocation in terms of economic, security strategic, social and humanitarian aspects. The empirical analysis of the South Korean case demonstrates that aid policies did not follow the ideological differences between governments. One of the key results is that aid allocation is more attributed to the distinct characteristics of the official development assistance management system and policies than to the party politics of South Korea.
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In the past several years, the Republic of Korea-a former least developed country (LDC) and aid recipient that became a donor-joined the "club of emerging donors" to Africa. In March 2006, President Roh Moohyun declared Korea's Initiative for Africa's Development. The initiative puts poverty reduction and socioeconomic development of African countries in the forefront. Using pooled cross-sectional time series data, in this study we examine the determinants of Korean bilateral official development assistance (ODA) to Africa for the period 1991-2011. The findings of the study suggest that the approach of Korean ODA does not differ significantly from that of many conventional donors whose ODA disbursement has had a dual purpose: to improve the welfare of developing countries and to serve self-interests.
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This paper assesses the impact of the tariffs faced by Organization for Economic Co-operation and Development (OECD) donors’ exports on their supply of Aid for Trade (AfT). The analysis is conducted on the basis of both a donor/year framework and a bilateral donor–recipient framework over the period 2002–2009. Results suggest that donors as a whole could reduce AfT budget supply when they face higher tariffs on their exports. However, low-income and lower-middle-income countries appear to be protected by donors from AfT decline, even if they impose higher tariffs on donors’ exports. Further multilateral tariff liberalization would certainly be conducive to higher AfT.
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This study investigates the relationship between countries’ structural economic vulnerability (EVI) and the bilateral aid received from donors, including in the context of higher degree of trade openness and/or financial openness. The empirical analysis suggests that donors’ bilateral aid supply to Least developed countries (LDCs) increases when the latter experience higher EVI. A rise in EVI in non-Least developed countries (non-LDCs) does not lead to higher donors’ aid supply. Furthermore, the analysis indicates that the impact of EVI on bilateral aid inflows could be dependent upon the degree of trade openness or financial openness but not on both together.
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This paper takes as its point of departure the European Commission's position, set out in 2005, which laid clear emphasis on aid and trade as tools for controlling immigration. We attempt to subject this position to empirical investigation. We exploit data on bilateral aid, trade and migration flows between developed and developing countries, for the period 2000–10, adopting an instrumental variable approach to address the endogeneity issue due to potential simultaneity bias. Our results establish that increasing aid and trade with developing countries is likely to fail to contain immigration, at least in the short run. The pattern of results is consistent with the hypothesis that promoting development in migrant-sending countries, or cooperating with such countries to control migration outflows, is not sufficient to lessen immigration. Increasing visa restrictions and controls at borders is generally controversial; still, the results imply that policymakers cannot attain their short-term immigration goals with the so-called smart solutions of aid and trade.
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Still influenced by the cold war thinking, many countries – especially looking to new rising powers – might interact in the international scenario through competition, instead than cooperation. However, China has seen more opportunities in cooperation than challenges in competition. Since 2013, Chinese president Xi Jinping pointed out clearly in various public occasions that this world has become a community of common destiny. In this paper, we used an asymmetric dynamic evolution game model, adding the hypothesis of win-win game, to analyze why China would like to choose the strategy of cooperation, rather than competition, in international affairs. We applied this analytical framework to the case study of Chinese and Japanese environmental assistance programs to Africa. We found that, based on the traditional game theory, under the hypothesis of the cold war mentality, China and Japan may act as mutual rivals. Under this circumstance, China, as an emerging developing country, will more likely choose the strategy of competition, rather than cooperating with other countries. Instead, Japan, as a traditional developed country, will more likely choose to cooperate, rather than competing with China, especially if the expected cost of the failure of the competition is high. However, in the new hypothesis of win-win game analysis, we found that cooperation strategy on development assistance to Africa is more likely a rational choice for both China and Japan. Thus, we suggest that China might keep practicing its win-win strategy and do not use the outdated zero-sum game and winner take-all strategy as some of its counterparts may probably do. This analytical framework can be applied to other international affairs involving China and other countries.
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Foreign aid effectiveness has been a hugely explored topic in the economic development and political economy literature. In spite of disagreements in the literature with regard to aid effectiveness, it can be undisputedly argued that aid is an important source of capital for many recipient nations. Yet, this source of capital can be extremely volatile. Studies stress that donors value recipients’ historical, strategic, and geographical interests. An extensive strand of studies have explored donor motives for aid allocation and have found factors like political and economic motivations, political favoritism, and donors’ ideology to be playing crucial roles in such allocations. This chapter summarizes the growing literature on donor motives for aid allocation to recipient nations.
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There is an optimism that a growing number of women in political office will reorient the focus of international politics towards more social and humanitarian issues. One basis for this optimism are arguments that women legislators hold distinct foreign policy preferences and act on them to affect changes in policy. However, we know little about gender differences in the behavior of individual legislators on these issues. This study investigates the behavior of individual legislators of the United States, one of the most important actors in international politics, in the context of development aid. Analyzing a diverse set of legislative behaviors in the U.S. Congress, we find no evidence that women legislators behave any differently than men with regard to these issues. Beyond its contribution to our understanding of the making and future of American foreign policy, this study contributes to broader debates about women’s representation and foreign policy.
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Foreign aid is one of the few areas where Americans say the government should spend less. We leverage a unique conjoint experiment to assess how characteristics of an aid package, as well as characteristics of the targeted country, affect public support. We find that people are far more inclined to support economic aid than military aid and are disinclined to provide aid to undemocratic countries. We also find that people are more averse to providing aid—particularly economic aid—to countries in the “greater Middle East” than those countries’ other characteristics would suggest. These effects are comparable to those associated with substantial increases in the cost of the aid package, suggesting that public wariness of foreign aid is not rooted in a fundamental aversion to spending in this domain. Our findings offer new insights into the contours of public opinion regarding foreign aid.
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Populist parties in governments are on the rise in many European countries that are also major donors of foreign aid. While the general political development of populism has attracted much scientific and media attention, there is little knowledge about how populist parties influence foreign aid spending. Since radical right-wing populism tends to over-prioritize domestic politics, populist radical right-wing governments are likely to reduce foreign aid spending. We argue that the larger the share of populist radical right parties in a government is, the less foreign aid is spent. We account for divisions of power by distinguishing between populist radical right parties in the legislative and executive branches of government. Analysing 25 OECD countries between 1990 − 2016 using generalized additive models, we find empirical support for our hypotheses. Our findings on foreign aid have implications for understanding the impact of populist radical right-wing parties on foreign policy making more broadly.
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The literature on aid allocation shows that many factors influence donors’ decision to provide aid. However, our knowledge about foreign aid allocation is based on traditional foreign aid, from developed to developing countries, and many assumptions of these theories do not hold when applied to southern donors. This article argues that south-south development cooperation (SSDC) can be explained by the strength of development cooperation’s domestic allies and foes. Specifically, it identifies civil society organizations as allies of SSDC and nationalist groups as opponents of SSDC. By using for the first time data on SSDC activities in Latin America, this article shows the predictive strength of a liberal domestic politics approach in comparison to the predictive power of alternative explanations. The results speak to scholars of both traditional foreign aid and south-south development cooperation in highlighting the limits of traditional theories of foreign aid motivations.
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This article investigates the interplay between non-reciprocal trade preferences and Aid for Trade (AfT) by examining the extent to which relative preferential margins (RPM) enjoyed by recipient countries affect AfT flows supplied by donors. The empirical results suggest that the RPM exerts a significant and positive impact on the bilateral AfT inflows that recipient countries enjoy from donors. In addition, when this impact is lower, the higher the recipient countries’ level of economic development. Furthermore, the analysis indicates that the influence of RPM on AfT is dependent on non-AfT (i.e., the aid flows allocated to the non-trade sector) allocated to recipient countries.
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Does women's representation affect the state's emphasis on development assistance? Earlier studies have found gender differences in foreign policy preferences. This study builds on that literature and advances two hypotheses regarding the impact of women's presence in national legislatures on the state's development assistance policy: (1) The women's values thesis builds on a literature that argues that women emphasize peace and social justice; (2) The social equity thesis suggests that a societal value favoring equity, as expressed in social democracies, may in fact explain both women's representation and development assistance. The empirical evidence includes data for three electoral cycles in seventeen donor states and demonstrates that women's representation and development assistance are indeed related. Although the evidence sug-development gests a direct impact, some caveats are discussed.
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The literature on the determinants of welfare state effort displays many inconsistencies and contradictions. This article takes important steps toward resolving these issues with the use of pooled cross-sectional and time-series analyses. The findings are that various independent variables affect different measures of welfare state effort in different and theoretically meaningful ways. Of special importance are the contrasting effects of Christian democracy and social democracy on transfer payments, social benefits expenditure, and total government revenue. There is also a strong effect of constitutional structure on welfare state effort, a finding that provides the first solid support for the state-centered perspective in a quantitative analysis.
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The influence of partisan politics on public policy is a much debated issue of political science. with I respect to foreign policy, often considered as above parties, the question appears even more problematic. This comparison of foreign aid policies in 16 OECD countries develops a structural equation model and uses LISREL analysis to demonstrate that parties do matter even in international affairs. Social-democratic parties have an effect on a country's level of development assistance. This effect, however, is neither immediate nor direct. First, it appears only in the long run. Second, the relationship between leftist partisan strength and foreign aid works through welfare state institutions and social spending. Our findings indicate how domestic politics shapes foreign conduct. We confirm the empirical relevance of cumulative partisan scores and show how the influence of parties is mediated by other political determinants.
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Does women's representation affect the state's emphasis on development assistance? Earlier studies have found gender differences in foreign policy preferences. This study builds on that literature and advances two hypotheses regarding the impact of women's presence in national legislatures on the state's development assistance policy: (1) The women's values thesis builds on a literature that argues that women emphasize peace and social justice; (2) The social equity thesis suggests that a societal value favoring equity, as expressed in social democracies, may in fact explain both women's representation and development assistance.The empirical evidence includes data for three electoral cycles in seventeen donor states and demonstrates that women's representation and development assistance are indeed related. Although the evidence suggests a direct impact, some caveats are discussed.
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Offering a unifying theoretical perspective not readily available in any other text, this innovative guide to econometrics uses simple geometrical arguments to develop students' intuitive understanding of basic and advanced topics, emphasizing throughout the practical applications of modern theory and nonlinear techniques of estimation. One theme of the text is the use of artificial regressions for estimation, reference, and specification testing of nonlinear models, including diagnostic tests for parameter constancy, serial correlation, heteroscedasticity, and other types of mis-specification. Explaining how estimates can be obtained and tests can be carried out, the authors go beyond a mere algebraic description to one that can be easily translated into the commands of a standard econometric software package. Covering an unprecedented range of problems with a consistent emphasis on those that arise in applied work, this accessible and coherent guide to the most vital topics in econometrics today is indispensable for advanced students of econometrics and students of statistics interested in regression and related topics. It will also suit practising econometricians who want to update their skills. Flexibly designed to accommodate a variety of course levels, it offers both complete coverage of the basic material and separate chapters on areas of specialized interest.
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The Nordic aid approach has become less distinguishable from that of other OECD donors. The early 1990s witnessed the ascension of conservative governments across the region whose objectives included dismantling much of the Nordic welfare state and promoting market-driven economic policies. The Nordic approach to foreign aid will continue its adaptation to the post-Cold War development climate. The Nordic approach epitomized altruism and unselfishness in the 1960s and 1970s, which paired economic growth and social equity. Today the Nordic model of development is less influential as it confronts ongoing criticism both internally and from overseas. As the Nordic states determine what it means to be Nordic in the next millennium, they must also redefine their relationship with the impoverished peoples of the world; this will have an impact on global development that transcends the states' individual roles, economic capabilities, and political influence.
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Christian democracy has been one of the most successful political movements in post-war Western Europe yet its crucial impact on the development of the modern European welfare state has been critically neglected. This book describes the origin and development of the Christian democratic movement and presents comparative accounts of the varying degrees of political entrenchment of national Christian democratic parties. Drawing upon cross-national indicators of welfare state development the existence of a distinctively Christian democratic (as opposed to a liberal or social democratic) welfare state regime, called social capitalism, is identified.
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Article
In the 1970s and 1980s, it is often said, the rate of economic change is accelerating while the capacity for political adjustment is shrinking. Throughout the advanced industrial world this divergence has become both a rallying cry for conservatives demanding fewer state intrusions in the market and a challenge to liberals seeking more eaective state intervention. In the case of the small European states, this book has argued, economic flexibility and political stability are mutually contingent. The corporatist strain in the evolution of modern capitalism no longer yields readily to interpretations based on such established dichotomies as market and plan, private and public, efficiency and equity, Right and Left. Under conditions of increasing vulnerability and openness, the large industrial states are groping toward workable solutions for the economic predicaments of the 1980s. The incremental, reactive policy of the small European states and a stable politics that can adjust to economic change provide a point of orientation that is both helpful and hopeful. Students of the international political economy are undecided whether the most important development of the 1970s lay in the predictable growth or the astonishing containment of protectionism. Similarly, students of domestic politics focus their attention both on the cartelization of politics in the hands of party, group, and bureaucratic elites and on the challenge that new social movements pose to established institutions. In analyzing the democratic corporatism of the small European states this book dissents from the view that capitalism is being driven by structural crisis toward collapse, nor does it support the view that capitalism is being resurrected by the vigors of market competition. Contradictions are inherent in all forms of political and economic domination. But democratic corporatism has been able to tolerate contradictions because of its accommodation rather than resistance to market competition and because of its inclusion of all significant actors in the decision-making process. Copyright
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Most studies of trade sanctions examine the success of sanctions at forcing the target country to change its policies. This article analyzes the success of sanctions in terms of a broader set of goals: compliance, subversion, deterrence, international symbolism, and domestic symbolism. I examine 19 sanctions cases using different evaluatory criteria for each goal. Three results emerge from the analysis. First, sanctions generally fail when the goal is compliance, subversion, or deterrence, but they have a great appeal as international and domestic symbols. Second, sanctions often reinforce the target's behavior and forfeit the initiator's future economic leverage over the target. Third, the goals of international and domestic symbolism usually undermine the goals of compliance and subversion.
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Conventional wisdom holds that women are more peace-loving or more pacific than men. Most of our knowledge about the gender gap in foreign policy attitudes originates from the United States, but it cannot be taken for granted that these results can be generalized to other countries. This article examines gender differences in foreign policy attitudes in Denmark; it discusses the systemic factors behind such gender differences as well as the systemic factors that cause foreign policy attitudes to influence elections. By the 1980s a clear gender gap in foreign policy attitudes had developed in Denmark. Several explanations for this gender gap are examined in the article: the theory about women's greater distance to foreign policy, the theory about specific women's values, and the theory about the political and feminist radicalization of women. The article concludes that Denmark's gender gap in foreign policy attitudes in Denmark in the late 1980s was due primarily to a general left-wing mobilization of women. Paradoxically, however, this development also seems linked to a revitalization of traditional women's values. The discussion of the systemic causes of the gender gap and of its election impact centers around three factors: the salience of foreign policy, the political mobilization of women, and the available political alternatives in a given election.
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This study quantitatively tests the relationship between state militarism and domestic gender equality. International relations literature on the impact and potential impact of women on foreign policy suggests that women are more peaceful in that they are less likely than men to support the use of international violence. Other research indicates that a domestic environment of inequality results in state militarism on the international level. Both lines of inquiry suggest that a domestic environment of equality between women and men would lead toward greater state pacifism, and four hypotheses are developed to test this relationship. The Militarized Interstate Dispute dataset is used with hostility level as the dependent variable to measure the level of militarism employed by any given state to resolve international conflicts. Independent variables for gender equality include percent women in parliament, duration of female suffrage, percent women in the labor force, and fertility rate. Several control variables (alliances, contiguity, wealth, and democracy) are added to the multivariate logistic regressions, and all four hypotheses are confirmed. This study substantiates the theory that domestic gender equality has a pacifiying effect on state behavior on the international level.
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The concept of global justice has been developed to stress the worldwide implications of moral problems. Not much, however, has been written about the actual politics of global justice. This article focuses on public opinion and argues that attitudes about international redistribution are not a simple projection of attitudes about the domestic situation. In countries where domestic income redistribution is seen as an important priority, foreign aid is less popular; where this is less so, there is more concern for the fate of the poor in the South. Far from reflecting a lack of coherence in public opinion, these counterintuitive results need to be understood in connection with policy achievements in donor countries. The authors' empirical findings suggest that although the commitment to redistribute is stronger at the national level, relationships of solidarity do not stop at national boundaries. The achievement of justice at home in fact sustains justice abroad.
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International Security 26.3 (2002) 39-55 Three to four thousand people, nearly all American citizens, perished in the aircraft hijackings and attacks on the World Trade Center and the Pentagon on September 11, 2001. They were murdered for political reasons by a loosely integrated foreign terrorist political organization called al-Qaeda. Below I ask four questions related to these attacks: First, what is the nature of the threat posed by al-Qaeda? Second, what is an appropriate strategy for dealing with it? Third, how might the U.S. defense establishment have to change to fight this adversary? And fourth, what does the struggle against al-Qaeda mean for overall U.S. foreign policy? Al-Qaeda is a network of like-minded individuals, apparently all Muslim but of many different nationalities, that links together groups in as many as sixty countries. Osama bin Laden, a wealthy Saudi who took part in the Afghan rebellion against the Soviet occupation (1979-89), developed this network. He inspires, finances, organizes, and trains many of its members. He seems to be in direct command of some but not all of them. Bin Laden and his associates share a fundamentalist interpretation of Islam, which they have opportunistically twisted into a political ideology of violent struggle. He and his principles enjoy some popular support in the Islamic world, though it is difficult to gauge its depth and breadth. Al-Qaeda wants the United States, indeed the West more generally, out of the Persian Gulf and the Middle East. In bin Laden's view, the United States helps to keep Muslim peoples in poverty and imposes upon them a Western culture deeply offensive to traditional Islam. He blames the United States for the continued suffering of the people of Iraq and for the Israeli occupation of the West Bank and the Gaza Strip. For him, Israel is a foreign element in the Middle East and should be destroyed. The U.S. military presence in Saudi Arabia is a desecration of the Islamic holy places and must end. Once the United States exits the region, al-Qaeda hopes to overthrow the governments of Saudi Arabia and Egypt and replace them with fundamentalist, Taliban-like regimes. It is no wonder that the Saudi regime con- sidered bin Laden so dangerous that it stripped him of his citizenship in 1994. Al-Qaeda is an ambitious, ruthless, and technically proficient organization. The stark evidence is at hand. It has attacked the United States before, but not with such striking results. For the September 11 attack, at least nineteen men, supported by perhaps a dozen others, plotted for years an action that at least some of them knew would result in their deaths. Each member of the conspiracy had numerous opportunities to defect. The terrorists piloting the four passenger jets understood the level of destruction they would exact. They carefully studied airport security and found the airports that seemed most vulnerable. Several of these men appear to have trained for years in U.S. flight schools to learn enough to pilot an aircraft into a building. The cockpits of the 757 and 767 are quite similar, which does not seem coincidental; a single experienced pilot could tutor all of the hijackers on the fine points of operating the aircraft. Between the two aircraft types, the conspirators could choose from a wide selection of flights. The 767s, the aircraft with the most fuel and hence the greatest destructive potential, were directed at the biggest target, the World Trade Center. The proximity of the departure airports to the targets permitted tactical "surprise." All four planes had small passenger complements relative to their capacity; this hardly seems coincidental given the hijackers' plan to take the aircraft with box-cutters. The hijackings of all four airliners were carefully synchronized. If this had been a Western commando raid, it would be considered nothing short of brilliant. Given the demonstrated motivation and organizational and technical skills of its members, al-Qaeda will likely attempt further large-scale attacks on the United States or its citizens and soldiers abroad, or both. Al-Qaeda benefited from the direct support of Afghanistan, which had been governed in recent years...
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In spite of the traditional legitimacy accorded the market mechanism of the private sector in advanced capitalist nations, governments in those nations have become more influential as providers of social services and income supplements, producers of goods, managers of the economy, and investors of capital. And in order to finance these various activities the revenues of public authorities have increased dramatically–to a point where they are now equivalent to one-third to one-half of a nation's economic product. This growth in governmental activity in advanced capitalist society is examined by considering the causes, and some of the consequences, of the expansion of the public economy–defined, following Schumpeter's discussion of the “tax state,” in terms of the extractive role of government. The primary concern of this article is to discover why some nations have experienced a far greater rate of increase in recent years and, as a result, have a much larger public economy than other nations. Five types of explanation are elaborated to account for the growth of the scope of governmental activity: (1) the level and rate of growth in the economic product; (2) the degree to which the fiscal structure of a nation relies on indirect, or “invisible,” taxes; (3) politics–in particular the partisan composition of government and the frequency of electoral competition; (4) the institutional structure of government; and (5) the degree of exposure of the economy to the international marketplace. The article evaluates the five explanations with data for 18 nations, and concludes by discussing some implications of the analysis.
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Small States in World Markets: Industrial Policy in EuropeKatzensteinPeter J.Ithaca: Cornell University Press, 1985, pp. 268 - Volume 19 Issue 2 - Michael M. Atkinson
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This essay seeks to lay the foundation for an understanding of welfare state retrenchment. Previous discussions have generally relied, at least implicitly, on a reflexive application of theories designed to explain welfare state expansion. Such an approach is seriously flawed. Not only is the goal of retrenchment (avoiding blame for cutting existing programs) far different from the goal of expansion (claiming credit for new social benefits), but the welfare state itself vastly alters the terrain on which the politics of social policy is fought out. Only an appreciation of how mature social programs create a new politics can allow us to make sense of the welfare state's remarkable resilience over the past two decades of austerity. Theoretical argument is combined with quantitative and qualitative data from four cases (Britain, the United States, Germany, and Sweden) to demonstrate the shortcomings of conventional wisdom and to highlight the factors that limit or facilitate retrenchment success.
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Baumgartner and Jones (1993) described a process of punctuated equilibrium in their study of policymaking in the United States since World War II. Evidence was drawn from a series of particular issue-areas, but the model has implications for all areas of policymaking. In this paper, we explore the validity of this approach with a new dataset that tabulates congressional budget authority at the Office of Management and Budget subfunction level across all areas of the federal budget for the entire postwar period.We find that government spending is characterized by much greater change than is typically portrayed in the literature, even if there is great stability for most categories most of the time. In addition, overall patterns of spending have been affected by two large-scale punctuations. These punctuations divide national spending into three epochs: one of postwar adjustment, lasting until FY 1956; one of robust growth, lasting from 1956 through 1974, and one of restrained growth, beginning in FY 1976. We test the epoch hypothesis against three plausible rival hypotheses: changes in the robustness of the postwar economy; partisan divisions; and public opinion. The epoch hypothesis survives all of these rivals whether modeled individually or together. This paper provides empirical evidence that punctuations occur, not just in some programs or subsystems, but also throughout government.
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We examine some issues in the estimation of time-series cross-section models, calling into question the conclusions of many published studies, particularly in the field of comparative political economy. We show that the generalized least squares approach of Parks produces standard errors that lead to extreme overconfidence, often underestimating variability by 50% or more. We also provide an alternative estimator of the standard errors that is correct when the error structures show complications found in this type of model. Monte Carlo analysis shows that these "panel-corrected standard errors" perform well. The utility of our approach is demonstrated via a reanalysis of one "social democratic corporatist" model.
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We examine the relationship between the temporal and spatial aspects of democratic diffusion in the world system since 1946. We find strong and consistent evidence of temporal clustering of democratic and autocratic trends, as well as strong spatial association (or autocorrelation) of democratization. The analysis uses an exploratory data approach in a longitudinal framework to understand global and regional trends in changes in authority structures. Our work reveals discrete changes in regimes that run counter to the dominant aggregate trends of democratic waves or sequences, demonstrating how the ebb and flow of democracy varies among the world's regions. We conclude that further analysis of the process of regime change from autocracy to democracy, as well as reversals, should start from a “domain-specific” position that dis-aggregates the globe into its regional mosaics.
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We develop a new typology for examination of the effects of international institutions on member states' behavior. Some institutions lead to convergence of members' practices, whereas others result, often for unintended reasons, in divergence. We hypothesize that the observed effect of institutions depends on the level of externalities to state behavior, the design of the institution, and variation in the organization and access of private interests that share the goals of the institution. We illustrate these propositions with examples drawn from international institutions for development assistance, protection of the ozone layer, and completion of the European Union's internal market. We find that significant externalities and appropriately designed institutions lead to convergence of state behavior, whereas divergence can result from the absence of these conditions and the presence of heterogeneity in domestic politics.
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Building on the literature on public finance, I seek to advance our understanding of variations in government size by exploring the impact of official development assistance on fiscal policy. I hypothesize that foreign aid operates in accordance with the “flypaper effect,” systematically generating incentives and opportunities for the expansion of government spending. Results from a time-series cross-sectional regression analysis of growth in government spending over the 1970–99 time period are consistent with the hypothesis. For middle- and lower-income nations, aid represents an important determinant of government expansion. Looking at the tax and revenue side of the equation, however, reveals a more perverse pattern of response: aid promotes not only increased spending but also reduced revenue generation. The results have important implications from both a theoretical and policy perspective. Inter alia they point to the potentially self-defeating nature of efforts to promote market-oriented programs of state retrenchment via development assistance as well as to the importance of incorporating international transfers into future research on government spending.
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The authors analyze the nation-state as a worldwide institution constructed by worldwide cultural and associational processes, developing four main topics: (1) properties of nation-states that result from their exogenously driven construction, including isomorphism, decoupling, and expansive structuration; (2) processes by which rationalistic world culture affects national states; (3) characteristics of world society that enhance the impact of world culture on national states and societies, including conditions favoring the diffusion of world models, expansion of world-level associations, and rationalized scientific and professional authority; (4) dynamic features of world culture and society that generate expansion, conflict, and change, especially the statelessness of world society, legitimation of multiple levels of rationalized actors, and internal inconsistencies and contradictions.
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A nation that lacks physical objects like factories and roads suffers from an object gap. A nation that lacks the knowledge used to create value in a modern economy suffers from an idea gap. Object gaps are emphasized by mainstream economists who make use of formal models and statistical hypothesis tests. Idea gaps are emphasized by dissident economists who make use of a diverse body of evidence and avoid formal models. Economists need to use the formal models from the first approach and the diverse evidence from the second to fully appreciate the importance of idea gaps in economic development.
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Predicting corporate distress can have a significant impact on the economy because it serves as an efficient early warning signal. This study develops distress prediction models incorporating both governance and financial variables and examines the impact of major corporate governance attributes, i.e., ownership and board structures, on the likelihood of distress. The two widely documented methods, i.e., logit and neural network approaches are used. For an emerging market economy where ownership concentration is common, we show that not only financial factors but also corporate governance factors help determine the likelihood that a company will be in distress. Our prediction models perform relatively well. Specifically, in our logit models that incorporate governance and financial variables, more than 85% of non-financial listed firms are correctly classified in our models. When we consider the Type I error, on average the models have the Type I error of about 9%. Likewise, the neural network prediction models appear to have good results. Specifically, the average accuracy of the neural network prediction models ranges from approximately 84% to 87% with the average Type I error raging from about 10% to 16%. Such evidence indicates that the models serve as sound early warning signals and could thus be useful tools adding to supervisory resources. We also find that the presence of controlling shareholders and the board involvement by controlling shareholders reduce the probability of corporate financial distress. This evidence supports the monitoring/alignment hypothesis. Finally, our results suggest evidence of the benefits of business group affiliation in reducing the distress likelihood of member firms during the East Asian financial crisis.
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World Development Indicators, the World Bank's respected statistical publication presents the most current and accurate information on global development on both a national level and aggregated globally. This information allows readers to monitor the progress made toward meeting the goals endorsed by the United Nations and its member countries, the World Bank, and a host of partner organizations in September 2001 in their Millennium Development Goals. The print edition of World Development Indicators 2005 allows you to consult over 80 tables and over 800 indicators for 152 economies and 14 country groups, as well as basic indicators for a further 55 economies. There are key indicators for the latest year available, important regional data, and income group analysis. The report contains six thematic presentations of analytical commentary covering: World View, People, Environment, Economy, States and Markets, and Global Links.