Foreign Aid, Time Horizons, and Trade Policy

Abstract

Although there are theoretical reasons to expect foreign aid to promote trade liberalization, empirical research has found no relationship. Without disputing this general nonresult, we argue that foreign aid can incentivize liberalization under certain conditions. In the absence of aid, the incentive to liberalize trade depends on government time horizons: Far-sighted governments have incentives to do so, whereas short-sighted governments do not. It follows that foreign aid should not encourage far-sighted governments to liberalize, as they do so in any case. Foreign aid can, however, induce short-sighted governments to liberalize by ameliorating short-term adjustment costs. We thus hypothesize that aid is more likely to promote trade liberalization when given to governments with short time horizons. We support this hypothesis with an analysis of aid, time horizons, and two measures of trade policy. Our results contribute to the growing debate about the conditions under which foreign aid encourages growth-enhancing policies.

What attracts foreign direct investment into autocratic states? Regime time horizon and institutional design

“…The key explanatory variables of this research are autocratic time horizons and the number of BITs. First, we use time horizons data created by Wright (2008), which is commonly used among scholars studying the effects of regime time horizons (Kono & Montinola, 2015; Moon, 2015). Theoretically, time horizon concerns an autocrat's expectation of future tenure and not the duration the regime has already existed.…”

Backing Despots? Foreign Aid and the Survival of Autocratic Regimes

“…At first sight, this state of the art suggests that the effect of foreign aid on political regimes is mixed, as it can strengthen both democratic and authoritarian regimes depending on other factors. 23 On second consideration, however, these divergencies do offer a hint on how to move forward. More positive results are often found when the donor is a powerful democracy such as the United States, promoting democracy in its geographic vicinities.…”

Cost of Compliance, Autocratic Time Horizon, and Investment Treaty Formation

“…Following previous studies (Dionne 2011; Kendall-Taylor 2011; Kono and Montinola 2015; Moon 2015; Wright 2008a, 2008b), we use the “yearly predicted probability of regime failure” to capture the time horizons of autocratic regimes. The risk index, or predicted probability of regime failure, is based on a panel logistic model that takes into account “observable causes” that lead to the failure of authoritarian rule (Wright 2008a, 2008b).…”

“…Finally, our paper offers a different perspective to help understand the significance of time horizon on economic policy making in autocratic regimes. Existing theories on time horizon in autocratic regimes tend to conceptualize it as an indication of the ruler's patience or the discount factor (Blake 2013;Kono and Montinola 2015;Moon 2015;Wright 2008aWright , 2008b. For example, Blake (2013) suggested there is a negative relationship between time horizon and the scope of provisions in BITs.…”