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Title:Essays on foreign aid volatility
Author(s):Iannantuoni, Alice
Director of Research:Winters, Matthew S
Doctoral Committee Chair(s):Winters, Matthew S
Doctoral Committee Member(s):Chaudoin, Stephen; Dai, Xinyuan; Gaines, Brian J
Department / Program:Political Science
Discipline:Political Science
Degree Granting Institution:University of Illinois at Urbana-Champaign
Subject(s):Foreign aid
aid volatility
aid allocation
international development
international organizations
Abstract:Existing explanations for why foreign aid can fail to achieve its objectives tend to highlight issues that have roots in recipient countries, and scholars have documented at length the perverse mechanisms through which recipient governments can misappropriate and misuse development assistance. In this dissertation project, I instead focus on a source of inefficiency that is largely donor-driven: the volatility of foreign aid flows. In the first essay of this project, I argue that aid volatility hinders the development of high-quality institutions in recipient countries. Unpredictable, highly-variable aid flows make it difficult for recipient governments to allocate resources across government agencies, to set an efficient tax policy, and to easily coordinate with nongovernmental and civil society organizations about the specific goods and services they will provide. I conceptualize aid volatility as unpredictability––the extent to which recipients are not able to predict the aid they should expect to receive in upcoming years; and variability––the extent to which the aid flows a country receives vary from year to year. I propose measures of aid unpredictability and aid variability, leveraging both a time-series approach and a predictive model of aid disbursements. I show preliminary but insufficient empirical evidence that persistent aid volatility is associated with worse outcomes in institutional quality in recipient countries; and I propose venues for further research on this question. In the second essay, I use the rotating Presidency of the Council of the European Union (EU) to study how the preferences of individual member states shape EU aid policy, thus potentially affecting the volatility of EU aid flows. I find evidence that, when holding the Presidency, member states influence EU aid budget to make it mirror their own bilateral aid allocation preferences. However, through a two-stage least-squares instrumental variable approach that builds on work by Allison Carnegie and Nikolay Marinov (2017), I do not find evidence that this exogenous increase in aid results in a robust positive effect on institutional outcomes. In other words, a positive but volatile increase in EU aid does not improve––and according to some of my analyses, might actually hurt––institutions in recipient countries. I propose that future research should further investigate the role of rotation-based institutional designs in organizations that allocate or disburse aid, in order to assess their impact on the degree of volatility in the resulting aid flows. Lastly, in the third essay, I investigate the relationship between the international rhetoric on what makes aid giving effective and donors' actual aid giving choices. I focus on two pathologies of aid giving that have been recognized as hurtful for aid effectiveness: (i) aid volatility and (ii) tied aid, i.e. the practice of requiring that portions of a donor's aid be spent on goods and services from firms in its home country. I measure donor discourse on these two topics in documents from the Development Assistance Committee of the Organisation for Economic Co-operation and Development. I then compare this discourse to data on aid volatility and tied aid in actual aid commitments and disbursements. I find evidence that, on the issue of tied aid, donor practice predicts donor discourse. Conversely, with regard to aid volatility, results suggest that discourse may influence practice––in the normatively desirable direction, whereby increased discussion of aid volatility predicts less volatile aid flows.
Issue Date:2020-12-03
Rights Information:Copyright 2020 Alice Iannantuoni
Date Available in IDEALS:2021-03-05
Date Deposited:2020-12

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