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Colonial Legacy and Foreign Aid: Decomposing the Colonial Bias

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  • Daina Chiba
  • Tobias Heinrich

Abstract

It is well-known that donors give considerably more foreign aid to former colonies than to countries lacking past colonial ties. Unfortunately, we know relatively little about why this is the case. For one, there is almost never a theoretical justification for the inclusion of colonial history in statistical models. For the other, the only explicitly made rationale by Bueno de Mesquita and Smith (2009) actually predicts an interpretational problem: colonial history not only increases a former colony’s saliency to the donor, but also has left deep marks on recipients’ social and political institutions today. Both aspects shape how much aid a donor transfers to the recipient. This leaves ambiguous the meaning of the routinely found positive, sizable, and significant coefficient of colonial history on aid flows. We solve the inferential quandary by using a decomposition approach from labor econometrics. Our results show that about 75–100% of the colony effect on foreign aid stems from the greater saliency that donors give to policy concessions from former colonies.

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  • Daina Chiba & Tobias Heinrich, 2019. "Colonial Legacy and Foreign Aid: Decomposing the Colonial Bias," International Interactions, Taylor & Francis Journals, vol. 45(3), pages 474-499, May.
    • Handle: RePEc:taf:ginixx:v:45:y:2019:i:3:p:474-499
    DOI: 10.1080/03050629.2019.1593834
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    Cited by:

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    2. Noamane Cherkaoui, 2022. "The Sovereignty of Developing Countries: The Challenge of Foreign Aid," Research papers & Policy papers on Economic Trends and Policies 2221, Policy Center for the New South.

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