Foreign Aid and Major-Power Competition: A Structural Approach

• In Event: Models of International Security and Foreign Policy

Abstract

The U.S. and China are entering a new era of major-power competition in which foreign aid serves as a tool for contesting global influence. What is the effect of competition on the distribution of aid from China and the U.S. 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 U.S. 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 contest model of aid distribution and estimate its parameters given the observed foreign aid commitments of the two countries. The structural approach allows us to (1) estimate the degree to which aid given by one major power to a specific recipient country responds to the expectations of its rival’s aid to the same country; (2) see whether other factors of potential recipient countries (e.g., democracy) moderate the U.S and China's response to each others' aid; and (3) compare a country's observed distribution of aid to the counterfactual distribution that would arise absent competition from its rival.

Authors

• Michael Gibilisco, California Institute of Technology

• Miguel R. Rueda, Emory University

• Brenton Kenkel, Vanderbilt University

• Anthony Luongo