Foreign Aid and International Support as a Gift Exchange

Regressions on data from 1948 to 1979 indicate that the US and the Soviet Union used foreign aid to stimulate international political support from the receivers of aid and that aid receivers allocated their political support to stimulate aid from these donors. The regressions are based on a game theoretical model in which aid donors provide aid to reach foreign policy goals and in which aid receivers in return give political support to the donors so as to raise foreign aid. With foreign policy ambitions, aid should be given the countries with low GDP levels, while if altruistic considerations determine aid, countries with low levels of GDP per capita should be the beneficiaries. Since foreign aid to some extent was the result of cold war rivalry, the changes in international relations which occurred with the fall of the Soviet Union, should lower total foreign aid.     

Is tied aid bad for the recipient countries?

This paper examines the welfare effects of the exclusivity of foreign aid taking consideration of donor countries' strategic and self-interested economic motivations. Based on an oligopolistic model with strategic interactions between firms and governments providing foreign aid, we demonstrate that a higher exclusivity of foreign aid, taking the form of tied aid, increases the equilibrium amount of aid and the social welfare of the recipient country when the foreign aid policies are decided in a non-cooperative fashion between donor countries. However, when donor countries coordinate aid policies to maximize joint-welfare including recipient country's welfare, the lower exclusivity of foreign aid, taking the form of untied aid, will increase the equilibrium amount of aid and the global social welfare. The results implicate that when a credible enforcement mechanism for the cooperative regime for foreign aid is not available, tied aid is welfare dominant policy for both donor and recipient countries than untied aid.     

China's Foreign Aid at a Transitional Stage

By estimating China's foreign aid as a proxy for China's bilateral Official Development Assistance and by analyzing its implementation structure and policy, this paper sheds some light on China's foreign aid activities, which have been at a transitional stage. Based on our estimates, the level of foreign aid in terms of net disbursement has increased sharply since 2004, reaching around US$7.1 billion in 2013. Some measures to strengthen the implementation structure to deal with this expansion have been introduced by the central government; however, this transition process needs more time. To facilitate this process, China is attempting to absorb knowhow on development assistance from multilateral institutions and Organisation for Economic Cooperation and Development's Development Assistance Committee countries that are eager to share their knowledge, with the expectation that China will eventually play a major role in international development.     

The International Politics of Reactive Currency Statecraft: Japan’s Reaction to the Rise of the Chinese Renminbi

This study analyses how a state’s reactive currency statecraft – its strategic reaction to an international currency issued by a foreign state – is shaped, by devoting special attention to its broad foreign policy stance towards the state issuing that international currency, with a main empirical focus on the Japanese case with regard to the Chinese renminbi. This research argues that a state uses its policy related to a foreign international currency as a diplomatic means of managing its political relationship with the state issuing that currency, while also showing that in general most market actors are not greatly interested in their governments’ policies regarding foreign international currencies, especially those that are newly internationalising ones. This study finds as well that the conventional notion of ‘competition’ between international currencies does not necessarily affect a state’s reactive currency statecraft, even if its own currency is a major international one. All of this suggests that the inter-state politics between the state issuing an international currency and foreign states does have a crucial impact on the currency’s international use, especially during its early stages of internationalisation. It also implies that a state’s reactive currency statecraft can be fluid, depending upon the directions of its foreign policy.     

Rethinking the aid–growth relationship: A network approach

Over 40 years of conventional economic analysis has not reached consensus on the effect of foreign aid on recipient country growth. We provide new insight into this relationship by using a network approach to characterize the topological properties of the Organization for Economic Co‐operation and Development (OECD) foreign aid network. Viewing the OECD foreign aid community as an interdependent and complex system, we characterize not only the amount of aid but also the position of both donor and recipient within the network. We find that the degree centrality of the recipient, with an edge inclusion threshold that sets a minimum share of a donor’s aid to a particular recipient, is significantly correlated with the growth impact of that donor’s aid. Contrarily, aid is uncorrelated with growth with a recipient‐side filter on the importance of the donor to the recipient. These results suggest that the importance of a recipient within the donor’s network, rather than the volume of aid alone, is associated with the growth impact of bilateral aid. We explore mechanisms for these findings that include the complementarity of aid from multiple attentive donors. Our findings speak to the aid–growth puzzle and suggest that network metrics may illuminate non‐obvious channels of aid impact.     

中国自贸试验区建设吸引了外商直接投资流入吗? ——来自216个地级市的面板数据考察

自由贸易试验区作为中国深化改革与开放的一项政策实验,尝试通过制度创新实现贸易、投资自由化,其政策效果究竟如何？研究基于2000—2019年216个地级市面板数据,运用广义合成控制法实证检验了我国自贸试验区对外商直接投资的影响。研究发现,自贸试验区在一定程度上吸引了外商直接投资流入,且随着时间推进,其对外商直接投资的正向促进作用愈发明显;控制其他政策因素的多期双重差分法的结果进一步验证了上述结论的可靠性。研究进一步发现：自贸试验区吸引外商直接投资的政策效果存在差异性。从时间趋势看,不同批次自贸试验区的政策导向不同,对外商直接投资的影响力度不同;从区域层面看,自贸试验区建设中,东部地区对外商直接投资的促进作用更强,中部地区的政策效应存在滞后性,西部地区吸引外商直接投资力度有下降趋势;从城市规模看,自贸试验区建设对一线城市外商直接投资的吸引力度更明显,级别越低的城市可塑性越强,吸引外商直接投资流入效果越显著。从不同发展梯度看,沿海自贸试验区对外商直接投资的正向影响程度高于内陆自贸试验区,而沿边自贸试验区并未发挥出对外商直接投资的吸引作用。     

Foreign aid,institutional quality and economic growth: Evidence from the developing world

This paper examines the effect of sectoral foreign aid and institutional quality on the economic growth of 74 developing countries from Africa, Asia and South America, and covers the period 1980–2016. We consider bilateral aid flows into three sectors, namely education, health and agriculture, and find that among the three types of aid, education aid is more effective for aid-receiving countries. The effect is conditional on the current level of institutional quality and varies substantially across regions. While education aid is more effective in South America, health aid is more effective in Asia and agricultural aid is more effective in Africa. As the level of institutional quality improves, the gap between the marginal effect of education, health and agricultural aids widen. Our findings have strong policy implication for donor countries and international aid organisations, which shows that it is more desirable to shift aid flows towards the education sector as the level of institutional quality improves.     

Pluralism or isolation of Civilisations? Russia's foreign policy discourse and the reception of Huntington's paradigm of the post‐cold war world

This paper studies the effects of Samuel Huntington's ‘Clash of Civilisations’ thesis on Russian foreign policy discourse. In response to Huntington's thesis, two major currents of Russia's foreign policy thinking ‐ Liberals and Nationalists ‐ are identified, both of which are critical of the thesis. The two groups offer diametrically opposed alternatives to Huntington's paradigm of the post‐Cold War world. The Liberal‐Nationalist controversy reflects Russia's debates about its own political identity and provides us with a rich and informative understanding of the process of identity formation. By identifying Russia's various reactions to the ‘Clash of Civilisations’ thesis, the paper identifies potential influences of various currents in Russian foreign policy thinking on the country's future foreign policy. It also suggests some implications for further studies of cultures/civilisations in international politics.     

The Political Economy of IMF Conditionality: A Common Agency Model

The paper models the relationship between an aid‐providing international financial institution (IFI) and an aid‐receiving government whose economic policy choices are influenced by a domestic interest group. Two assistance schemes are evaluated: conditional aid in which the IFI makes assistance contingent on less‐ distorting economic policies and unconditional aid which is provided without such conditions. Conditional aid is shown to raise welfare of the receiving country and the world as a whole relative to unconditional aid. The paper also examines how conditional and unconditional aid schemes are influenced by the IFI's opportunity cost of providing assistance and the receiving government's political dependence on a domestic interest group.     

Foreign Aid,Incentives and Efficiency: Can Foreign Aid Lead to the Efficient Level of Investment?

This paper develops a two‐period model in which the recipient faces borrowing constraint and the donor is a Stackelberg follower to address two important policy questions: (i) whether foreign aid can lead to the efficient level of capital investment in the recipient country and (ii) how does the form (e.g. budgetary transfers, capital transfer) and the timing of aid affect the recipient's financial savings and capital investment. It finds that the disincentive effect of the capital transfer on the capital investment by the recipient is larger than the budgetary transfers. It makes financial savings more attractive relative to the capital investment for the recipient. In the absence of capital transfer, the multi‐period budgetary transfers not only lead to the efficient level of capital investment by the recipient, but also achieve the same allocation as under commitment. The capital transfer can lead to the efficient level of capital investment, but in this case, it completely crowds out the recipient's own capital investment.     

腐败犯罪境外追逃措施探析

腐败犯罪的国际化的趋势要求中国必须借助外交和司法等多种途径抓捕外逃贪官。引渡是国际刑事司法协助的主要形式之一,引渡条约的签订受制于多种因素,这对国内司法产生一定影响;遣返作为一种行政手段,成为引渡的一种常规替代措施;劝返适用于境外追逃效果显著,但其存在合法性的质疑;异地刑事诉讼节省司法资源,不需要让渡法律的公正性;绑架、诱捕等西方国家经常适用的非常规手段中国尚未适用,其合理性有待认证。     

Domestic Political Institutions,Diplomatic Style and Trade Agreements: A Comparative Study of China and Japan

Through an analysis of the formation of free trade agreements (FTAs), this article seeks to examine the factors that caused the gap in Japan and China's relationship with Southeast Asia to emerge and expand in the new millennium. In order to address this question, the article focuses on China and Japan's diplomatic styles and domestic political institutions and examines how these two elements influenced negotiations on the formation of FTAs, as well as the evolving perceptions that the Southeast Asian nations have of these two states. The article argues that Japan and China possess different kinds of weaknesses in implementing feasible external policies – a lack of policy decisiveness for Japan and weak policy credibility for China – which have resulted from the operation of domestic political institutions. Given these differences, while China implemented pragmatic diplomacy that helped improve its policy credibility, Japan's bargaining diplomatic style did not serve to rectify its weak policy decisiveness. Such differences in their diplomatic approach have led to the differing influence of these two states on Southeast Asia.     

Alfred Thayer Mahan and American Geopolitics: The Conservatism and Realism of an Imperialist

Debate about the goals of American foreign policy at the end of the twentieth century, especially that thread differentiating “conservative” from “neoconservative” perspectives, might profit by revisiting the debate over American expansion at the end of the nineteenth century. “I am an imperialist,” Captain Alfred Thayer Mahan once remarked, “simply because I am not isolationist.” This paper explores the connection between Mahan's defense of imperialism-often couched in terms of national interest and balance of power- and the norms of American power in world politics. The will-to-power behind American expansion and involvement, a formidable pillar in Mahan's realism, coexisted (often uneasily) with the affirmation of national purpose, a less formidable but still important part of Mahan's idealism. Mahan's strong conservative inclinations in politics were matched by a willingness to employ the tools of realism-particularly traditional diplomatic methods-as a way to uphold historic national goals and moral vision in American foreign policy. Far from seeing an irremediable conflict between the counsels of realism and limited moral gains in foreign policy, Mahan understood that governments are not immune from certain overall constraints. Seldom if ever could American actions abroad be defended by arguing solely for the maintenance or increase of national power.     

Foreign aid and governance in Africa

This paper investigates the effect of foreign aid on governance in order to extend the debate on foreign aid and to verify common positions from Moyo’s ‘Dead Aid’, Collier’s ‘Bottom Billion’ and Eubank’s ‘Somaliland’. The empirical evidence is based on updated data from 52 African countries for the period 1996–2010. An endogeneity robust instrumental variable Two-Stage-Least Squares empirical strategy is employed. The findings reveal that development assistance deteriorates economic (regulation quality and government effectiveness) and institutional (corruption-control and rule of law) governance, but has an insignificant effect on political (political stability, voice and accountability) governance. While, these findings are broadly in accordance with Moyo and Collier on weak governance, they neither confirm the Eubank position on political governance nor the Asongu stance on the aid-corruption nexus in a debate with Okada and Samreth. The use of foreign aid as an instrument to influence the election and replacement of political leaders in Africa may have insignificant results. It is time to solve the second tragedy of foreign aid and that economists and policy makers start rethinking the models and theories on which foreign aid is used to influence economic, institutional and political governance in recipient countries.     

Foreign Aid under Quantitative Restrictions: Welfare Effects and International Factor Mobility

Using a two‐country, general‐equilibrium model of international trade, this paper incorporates pre‐existing quantitative trade restrictions and international factor mobility into the transfer problem analysis. The effects of foreign aid on the welfare of both the donor and recipient nations are identified under each form of quantitative trade restriction: quotas and voluntary export restraints (VERs). In doing so, this paper identifies conditions under which international transfers are strictly Pareto‐improving (i.e. increase global welfare). A central result of this analysis is the direct welfare effect of a transfer received by a nation with quota‐constrained (VER‐constrained) imports is enhanced (may be enhanced) by a worsening of the recipient’s terms of trade.     

An Empirical Analysis of the Effect of Aid on Growth

The fact that so many countries register low per capita income after receiving enormous amounts of foreign aid questions its effectiveness as a tool for economic growth and consequently as an instrument of poverty alleviation. The impact of foreign aid on economic growth is ultimately an empirical question and one that will be addressed in this paper. The paper uses the most recent data and incorporates most of the salient features of the new growth literature to test the effect of aid on economic growth. Three important conclusions emerged from the empirical analysis of the paper. First, it shows that the effect of aid on growth is nonlinear. The nonlinearity of the relationship indicates a threshold for foreign aid beyond which more aid is detrimental to economic growth. Second, the empirical results of this paper support Burnside and Dollars findings that a good policy environment is important for aid to work effectively. Aid effectiveness can only be sustained in an environment of good economic policy. Finally, using etholinguistic fractionalization as an instrument, the empirical results of the paper indicate that the relationship between AID/GDP and economic growth is sequential. More and more aid leads to lower economic growth.The authors would like to thank W. Mark Crain, G. Chris Rodrigo, Willem Thorbecke, an anonymous referee, and the participants of the 57th International Atlantic Economic Conference held in Lisbon, March 10–14, 2004. This paper is presented to the conference under a different title. Professor Ali would also like to thank the Research Council of Niagara University for their financial help.     

The effect of foreign aid on corruption: A quantile regression approach

This paper investigates the effect of foreign aid on corruption using a quantile regression method. We show that foreign aid generally reduces corruption, and its reduction effect is greater in less corrupt countries. Moreover, this effect is different by different donor countries.     

Are Aid Flows Excessive or Insufficient? Estimating the Growth Impact of Aid in Threshold Regressions

Existing empirical studies and policy reports provide ambiguous results on the growth effect of foreign aid flows in the recipient countries. The present paper examines whether there exists an aid threshold that determines the growth impact of foreign aid. We use a threshold regression methodology to estimate growth specifications and the associated aid thresholds in a sample of 42 aid recipients covering the period 1970–2000. Our findings indicate that there is a threshold level of aid, above which the growth impact of aid becomes positive.     

Domestic rivalry and export performance: theory and evidence from international airline markets

Abstract .  The much studied relationship between domestic rivalry and export performance consists of those supporting a national-champion rationale, and those supporting a rivalry rationale. While the empirical literature generally supports the positive effects of domestic rivalry, the national-champion rationale actually rests on firmer theoretical ground. We address this inconsistency by providing a theoretical framework that illustrates three paths via which domestic rivalry translates into enhanced international exports. Furthermore, empirical tests on the world airline industry elicit the existence of one particular path – an enhanced firm performance effect – that connects domestic rivalry with improved international exports.     

Aiding regional instability? The geopolitical paradox of Japanese development assistance to China

During the past decade, Japan established itself as the largest bilateral donor of development aid in the world, with more of it directed toward projects in China than any other recipient. Japan sees its aid flows to China as maintaining economic stability in East Asia, particularly as China's raw material and energy resources are articulated into regional markets. In this article, I argue that Japan's aid to China may unintentionally diminish Japan's and the East Asian region's long‐term security for two reasons. First, similar to other nations receiving such assistance, this aid may allow China to reallocate scarce capital to military modernisation. Such military modernisation may enable China to both better suppress internal dissent and carry out a more aggressive foreign policy. Second, this aid does not address the fundamental structural aspects of China's present instability. Long‐term structural instability has many sources, but the two discussed here are socio‐economic inequality (both interregional and intraregional), and sustainable production and environmental problems. Taken together these have important regional and geopolitical implications and repercussions. This article fills a gap in the existing literature on East Asian geopolitics. Namely, that by attending only to relatively short‐term corporate and perceived state interests of China and Japan, Japanese aid to China does little to ameliorate and potentially exacerbates long‐term structural social and environmental problems for China's vast majority living in rural hinterlands. The potential for internal turmoil springing from this uneven and unsustainable development inside China is the real basis for China's ‘threat’ to East Asian security. Thus what appears to make good development and geopolitical sense at first look, Japan's current aid regime with China, paradoxically may actually be the worst path to follow.