The International Relations workshop presents
Michael Gibilisco, California Institute of Technology:
“Strategic Foreign Aid: A Structural Approach.”
What is the effect of competition on the distribution of aid from China and the US across the globe? While the literature has studied how specific factors (e.g., democracy) affect the amount of foreign aid a country receives, we still do not know whether these factors affect the preferences of the US and China for giving aid directly or indirectly via competition and strategic interaction. In this paper, we answer these questions by adopting a structural approach: we construct a game-theoretic contest model of aid distribution and estimate its parameters given the observed foreign aid commitments of the two countries in the period 2000-2021.
We find that non-strategic factors are the primary determinants of donation amounts. However, strategic considerations play a significant role for a substantial minority of observations in our sample, with these factors being most prominent for the US to recipients with higher per capita GDP, and for China to recipients that are members of the UN Security Council or rich in natural resources. Our counterfactual experiments demonstrate that aid from the US will generally discourage aid from China, but not vice versa.