Undermining Conditionality? The Effect of Chinese aid on Compliance with World Bank Aid Agreements
This study investigates the effect of Chinese development assistance on recipient country compliance with aid conditionality in Sub-Saharan Africa. I argue that the presence of a significant non-traditional donor, which does not utilize conditionality, weakens the material incentives of recipient countries to comply with conditions attached to foreign aid from traditional donors. I formalize the theoretical argument by incorporating unconditional aid from China into the existing aid-for-policy framework commonly used to model aid conditionality. In an infinitely-repeated and simultaneous aid-for-policy game, the model predicts that Chinese development assistance limits the conditions under which recipient countries are willing to comply with conditionality. I test the theoretical predictions using project-level data on government compliance with World Bank project agreements for a sample of 42 Sub-Saharan African countries from 2000-2014. The empirical analysis finds strong support for the hypothesis that Chinese development assistance decreases the likelihood of recipient country compliance with conditions in World Bank project agreements. The results are robust to a number of alternative specifications, measures of Chinese development assistance, and an instrumental variable approach.
Foreign Aid and Political Budget Cycles in Developing Democracies
The second paper of my dissertation examines the effect of foreign aid on the incidence of political budget cycles (PBCs) in expenditures and taxation in developing countries. I argue that foreign aid is a fungible source of revenue that incentivizes incumbents to manipulate fiscal policy for electoral purposes. Specifically, I theorize that aid increases the likelihood of political budget cycles by increasing the value of holding office, obscuring fiscal transparency, and creating a soft budget constraint that discourages fiscal discipline. Using panel data for over 70 developing democracies from 1990-2012, the empirical analysis finds that political budget cycles in expenditures are statistically and substantively larger as foreign aid within a country increases. Contrary to my hypothesis, the analysis reveals no significant relationship between aid and tax revenue prior to elections. The primary results hold for a host of robustness checks that address concerns related to alternative explanations of political budget cycles, potential sources of omitted variable bias, estimation strategy, and outliers in the data. The findings of the paper suggest that the structure of public finance in developing countries may impact incumbents’ choice of pre-electoral fiscal manipulation strategy.
Foreign Aid Projects and Institutional Trust: A Geospatial Approach
The third paper of my dissertation investigates the effect of foreign aid on citizens’ trust in local and national political institutions. Drawing on institutional theories of political trust, I hypothesize that foreign aid projects reduce trust in political institutions by lowering citizens’ perceptions of government performance and increasing perceptions of corruption. To analyze the impact of aid on trust, this study utilizes geolocated survey data on citizens’ trust in political institutions from Afrobarometer Rounds 2-5 (2003-2012) and data on the location of foreign aid projects from AidData’s Aid Information Management Systems (AIMS) datasets for Nigeria, Senegal, and Uganda. Using a spatial difference-in-difference strategy, the empirical results find that active aid projects are associated with decreased trust in the president, parliament, and local government council. The results also indicate that closed aid projects are associated with declines in institutional trust, although the effect size is statistically and substantively smaller than active projects.