eprintid: 21876
rev_number: 15
eprint_status: archive
userid: 2744
dir: disk0/00/02/18/76
datestamp: 2016-09-27 10:44:19
lastmod: 2016-10-07 14:48:41
status_changed: 2016-09-27 10:44:19
type: workingPaper
metadata_visibility: show
creators_name: Langlotz, Sarah
creators_name: Potrafke, Niklas
title: Does development aid increase military expenditure?
subjects: ddc-330
divisions: i-181000
keywords: aid, military expenditure, fungibility, instrumental variables, causality
abstract: The diversion of development aid to the recipient’s military may be one explanation why aid is often found to be ineffective in promoting economic growth and development. Previous studies have not derived the causal effects of development aid on military expenditure. Using a new instrumental variable strategy, we examine whether bilateral development aid increases military expenditure in recipient countries. The instrument is the interaction of donor government fractionalization and the probability of receiving aid. The dataset includes new data on military expenditure for 124 recipient countries over the 1975-2012 period. While development aid has a positive effect on military expenditure in the full sample, the effect vanishes when we exclude outliers. However, we find that aid provided by coordinated market economies increases military expenditure in the full sample of recipient countries, even after controlling for outliers. Coordinated market economies have been found to deliver more government-to-government aid, which has a higher risk of capture compared to aid delivered through non-state development actors.
date: 2016-09
id_scheme: DOI
id_number: 10.11588/heidok.00021876
schriftenreihe_cluster_id: sr-3
schriftenreihe_order: 0618
ppn_swb: 1658768566
own_urn: urn:nbn:de:bsz:16-heidok-218765
language: eng
bibsort: LANGLOTZSADOESDEVELO201609
full_text_status: public
series: Discussion Paper Series, University of Heidelberg, Department of Economics
volume: 0618
place_of_pub: Heidelberg
pages: 43
citation:   Langlotz, Sarah ; Potrafke, Niklas  (2016) Does development aid increase military expenditure?  [Working paper]     
document_url: https://archiv.ub.uni-heidelberg.de/volltextserver/21876/1/Langlotz%20Potrafke%202016%20dp618.pdf