Was that foreign aid … or a campaign contribution?

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The scholarly literature on aid effectiveness focuses on answering one of two questions: 1) Is aid effective at causing growth? And 2) Is aid effective at reducing poverty? But what about when growth and poverty reduction aren’t the goals? What if the purpose of some aid is to influence a foreign election?

Some clever forensic statistic work is suggestive that bilateral donors use aid (ODA) to influence elections. They give more aid to friendly governments in election years...

An administration that is two standard deviations more politically aligned with the donor can expect to receive $19 million more in ODA flows during an election year relative to a non-election year than the less aligned administration.

And less aid to unfriendly governments in election years...

…an administration one standard deviation below the mean level of donor-alignment receives $8 million less on average during an election year.

It’s also suggestive that the results were most pronounced in highly-contested elections.

A recent example:

In [2006] elections, the U.S.-supported incumbent, the Palestinian Authority (P.A.), faced strong opposition from Hamas. In the weeks preceding the elections the United States Agency for International Development Assistance (USAID) funded several development programs including the distribution of free food and water, a street-cleaning campaign, and computers for community centers. The USAID money was even used to fund a national youth soccer tournament A progress report distributed to USAID and State Department officials was strikingly candid about the purpose of this aid:

“Public outreach is integrated into the design of each project to highlight the role of the P.A. in meeting citizens needs. The plan is to have events running every day of the coming week, beginning 13 January, such that there is a constant stream of announcements and public outreach about positive happenings all over Palestinian areas in the critical week before the elections.”

The whole paper, by Michael Faye of McKinsey and Paul Niehaus of UCSD, is here.