United States Economic Aid and Repression: The Opportunity Cost Argument*

Abstract

The United States explicitly ties its foreign economic aid to respect for human rights by recipient countries. The United States is also the world's largest aid donor. It is therefore surprising that no link has been established between U.S. economic aid and greater respect for human rights abroad. I change this by arguing that U.S. aid policies do affect human rights records but in an indirect way. Repressive leaders foregoing substantial amounts of U.S. aid because of their human rights policies are also the leaders most likely to increase their respect for human rights in the future. I calculate the opportunity costs of human rights abuse, in part, by estimating a two-stage model with selection that simultaneously assesses the decision to grant aid and the amount of aid disbursed to each country. By modeling the process this way, I am able to demonstrate that human rights concerns affect only the decision to grant aid; need determines the amount of aid given after recipients are selected. I then use predicted aid amounts from the selection model to determine the likelihood and amount of aid for each country-year that was not selected to receive aid. These estimated opportunity costs correlate strongly with increases in human rights for “partly free” states.

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