We help arbitrate the debate over this question by leveraging a novel source of exogeneity: the rotating presidency of the Council of the European Union.
We find that when a country’s former colonizer is the president of the Council of the European Union during the budget-making process, the country is allocated considerably more foreign aid than are countries whose former colonizer does not hold the presidency.
Using instrumental variables estimation, we demonstrate that this aid has positive effects on multiple measures of human rights and governance, although the effects are short-lived after the shock to aid dissipates.
A new paper by Aronow, Carnegie and Marinov.
@cblatts More on links between aid and #governance http://t.co/N699e1rG
It seems unlikely the instrument satisfies the exclusion restriction. An alternative mechanism: EU Presidency by former colonial power –> EU officials paying more attention to the country –> temporary cleaning up of act. No aid required.
@cblatts interesting piece! you might enjoy: International #aid, but not as we know it http://t.co/3b3UGtVP #poverty #development #loans
Dear Sam, Presidency by colonial power in year t-2 influences budget for year t-1, Commission allocates money in t-1, we look for effects in year t: note that by the time the money is to be allocated, the President is no longer the current President, undermining the story you outline. Thanks for the comment!