Bad Samaritans in Foreign Aid: Evidence from Major Mineral Discoveries

Rabah Arezki, Youssouf Camara, Frederick (Rick) van der Ploeg, Grégoire Rota-Graziosi and Rick van der Ploeg

No 11427, CESifo Working Paper Series from CESifo

Abstract: This paper explores whether foreign aid is self-interested, exploiting the timing and size of major mineral discoveries. We first analyze the effect a resource discovery in a two-by-two donor-recipient model with conflict about natural resources, using a contest success function. We then estimate the effects of major discoveries using a gravity model for a large panel of countries. Our empirical estimates are consistent with the predictions of the theoretical model. Results show that recipient countries that experience major discoveries receive more, not less, bilateral aid, all else equal. Our benchmark result is that following a mineral discovery, a recipient country receives 36% more aid compared to a country without such a discovery. That is a paradox considering that major discoveries are associated with an effective relaxation of international borrowing constraints.

Keywords: bilateral aid; self-interested donors; mineral discoveries; contests (search for similar items in EconPapers)
JEL-codes: E00 F30 O10 O20 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-dev and nep-fdg
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Related works:
Working Paper: BAD SAMARITANS IN FOREIGN AID: EVIDENCE FROM MAJOR MINERAL DISCOVERIES (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11427

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