Reward, punishment or inducement? US economic and military aid, 1946-1996

If the US has wielded power as global hegemon, then there should be evidence of a linkage between American resources and the ability to influence behavior. However, there is widespread disagreement on how this power is manifested (see Krause, 1991). Methodological and epistemological issues have hampered empirical studies of US hegemonic behavior. For example, does the US reward past behavior or does it offer inducements for future behavior? We document and discuss these issues in terms of the aid-foreign policy compliance nexus. The empirical portion of our paper tests whether US military and non-military aid are correlated with foreign policy similarity. The main merits of our study are that: (1) we test a new measure of foreign policy similarity developed by Signorino and Ritter (1999) and compiled by Gartzke et al. (1999); (2) we relax the causality issue and test using vector autoregression (VAR) for 76 developing countries; and (3) our time horizon is a minimum of 30 years for each country. Our central finding is that aid is most often used as a reward. More specifically, foreign policy similarity leads to greater economic aid for most African countries, foreign policy similarity leads to greater military aid for a majority of Latin American states, and there are no overarching patterns for Asia and the Middle East. We discuss the implications of our findings in the context of the bargaining and structural approaches to statecraft.