Nathan Nunn’s recent talk on economic development

Here is one excerpt of many substantive points:

Numerous studies have formally tested for relationships between foreign aid and conflict,using a range of identification strategies to obtain credible causal estimates. Many studies find that foreign aid can increase conflict. Nunn and Qian (2014) find this to be the case for U.S. food aid. Their analysis uses an IV strategy where U.S. wheat production shocks, combined with a country’s tendency to receive wheat aid from the U.S. to obtain exogenous variation in U.S. food aid supply. Crost, Felter and Johnson (2014) use an RD strategy that exploits an eligibility cut-off for a World-Bank-funded development program in the Philippines to estimate the effects of the program on conflict. They find that eligibility to participate in the program is associated with more conflict, which appears to be due to an increase in insurgent attacks against government forces in an attempt to disrupt the program. Dube and Naidu (2015) estimate the effects of military aid in Colombia using a differences-in-differences identification strategy. They find that U.S. military aid leads to an increase in conflict and violence arising due to an increase in attacks by paramilitaries…

While there is evidence that foreign aid can increase conflict, it is not the case that it always leads to conflict. For example, Nunn and Qian (2014) show that among the countries in their sample without a recent history of past conflict, food aid does not increase conflict. In a follow-up study that studies a conditional cash transfer program also in the Philippines, Crost, Felter and Johnson(2016) find that this aid package actually decreased conflict. Trisko Darden (2020) finds that the effect of U.S. aid on state killings and repression of its citizens is weaker following the end of the Cold War.

Given the evidence that foreign aid can sometimes cause conflicts, but at other times have no effects or even reduce conflict, the natural next question is how we implement foreign aid projects in a manner that minimizes its harm, thus maximizing overall benefit.

That is from a recent and really quite excellent talk on development by Nathan Nunn.  He also has an especially interesting discussion of the geographic centralization of RCTs in economics among numerous other points of note.  Recommended.

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There is no theory for foreign aid results.
Foreign aid from the USA will have heterogeneous ulterior motives according to what whim applies in the senate.

Skip the foreign aid as cause. Instead select any and all potential volatility instruments to compare against conflict. The problem most likely found is domestic mismanagement in the developing nations.

End foreign aid and return the billions to the taxpayers.

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Minimizing conflict may not be the optimal goal. Letting people starve to death minimizes conflict.

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Don't the authors have the causation backwards: it's the presence or likelihood of conflict that motivates the foreign aid. It's certainly true that the U.S. focuses much of its foreign aid to friendly countries with an insurgency or risk of insurgency. I suppose the presence of foreign aid could motivate conflict as a means of stealing the foreign aid, but the foreign aid is present in the first place because of the presence or risk of conflict from insurgents or groups hostile to the government.

My thoughts exactly. I would like to know the suspected mechanisms through which aid causes conflict.

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US foreign aid is motivated primarily by the political goals of the United States, not the interests of local populations (this is clear from seeing which countries receive the most US aid and noting that this has little overlap with which countries are objectively neediest), so it’s not surprising that such aid would have on average a neutral or negative impact. The best foreign policy for developing poor countries is one of non-intervention.

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The cause of development is similar to the cause of business growth: both require an investment in the future. I thought about this while reading the latest news about Amazon, whose profits have fallen significantly as it invests current earnings in future growth. In Amazon's case, the investment is in marketing to promote its cloud computing services in an effort to lure bigger legacy businesses and in one day shipping to lure more customers to its core business. I understand the investment in cloud computing (since it's the source of much of Amazon's profits), but I don't get the investment in one day shipping. "Amazon expects to spend about $1.5 billion for one-day delivery during this quarter, which includes the holiday season . . . . A typical order for items shipped in two days or more is $23.33, and Amazon spends $5.08 to fulfill and ship the items, according to a Morgan Stanley analysis. But for one-day shipping, the typical order is $8.32, and Amazon spends $10.59 to fulfill and ship it, meaning it loses money on many sales." Some developing countries build bridges to nowhere, just like Amazon. https://www.nytimes.com/2019/10/24/technology/amazon-earnings.html

The single biggest meta-competition against on-line shipping is retail sales. And that's due to being able to make the purchase immediately and being able to physically access the purchase.

Some people who are thinking of going shopping tomorrow for an item are already researching the options on-line. If they have the ability to just get it right now with One Click and have it delivered tomorrow they often will.

Going from 3 day to 2 day to 1 day delivery closes the temporal gap between Amazon and Walmart sales.

I suppose Amazon will make up in volume for the losses Amazon incurs on each sale with one-day shipping. [That's a joke for the literalists among us.]

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Chris Barrett and Paul Christian have an excellent take-down of the Nunn and Quin (2014) paper. I'm disappointed to see it is still being cited.

http://barrett.dyson.cornell.edu/files/papers/Spurious%20Regressions%20and%20Panel%20IV%20Estimation%2013%20May%202019%20with%20appendices.pdf

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"While there is evidence that foreign aid can increase conflict, it is not the case that it always leads to conflict."
Foreign aid doesn't ALWAYS lead to conflict. Great.

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I thought this was a pretty trite review of development trends. Except for an emphasis on RCT's, nothing really new compared to when I was in school in the aughts.

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