International Hierarchy and Foreign Aid Allocation

• In Event: Foreign Policy and the Politics of Foreign Aid

Abstract

Since the 1990s, studies on international hierarchy have been increasing. Nevertheless, only a few of them have studied the impact of hierarchy on the conduct of foreign policies, and the ones that have done so suffer from methodological flaws. There are two challenges for empirical studies of hierarchy. First, international hierarchy changes little over time, and we do not have an accurate measurement to capture the changes that are often subtle. Second, hierarchy often builds on preexisting historical and geopolitical ties. If they both change little over time, it will be extremely difficult to isolate hierarchy from historical and geopolitical factors. This paper will try to overcome these two methodological challenges through a case study of France and French aid to former colonies and to franc zone countries. In this paper, I define hierarchy as a social contract between a subordinate state and a dominant state in which the subordinate gives up a portion of its sovereignty for a political or economic order. By this definition, a hierarchy exists between France and states in the franc zone. However, the level of hierarchy changed in 1979 when France joined the European Exchange Rate Mechanism and in 1999 when it joined the euro-zone. These changes provide an opportunity to explore the correlation between hierarchy and aid distribution. Theoretically, I hypothesize that an increase in the hierarchy will lead to a decrease in foreign aid allocation, which I call the hierarchy’s substitution effects. I will use foreign aid data and a new statistical method—Generalized Synthetic Control to test this hypothesis. This paper has two contributions to the literature. First, this is one of the few papers that explore hierarchy’s impact on foreign affairs, and it is the first one that employs cross-time and cross-sectional comparison. Second, this paper introduces a new way of studying international hierarchy. When a state joins a binding international institution, it affects the state’s relationship with other states, including the ones that are in a hierarchical relationship with the former. In other words, international institutions can serve as an instrumental variable that isolates hierarchy from historical and geopolitical con-founders. Statistical analysis shows that when the level of hierarchy declines, the amount of aid will increase substantially. Results are statistically significant in all models.

Author

• Qi Zhang, Georgetown University