US aid, US educated leaders and economic ideology

Abstract

The Unites States (US) openly promotes its economic ideology of free-markets through foreign aid. It also regards foreign education in the US as a way of spreading its own ideas and values among the elite in developing countries. US educated aid recipient country leaders may thus receive more US aid, if they share both the cultural values and economic ideology of the US. I test this hypothesis using a panel fixed-effects regression model for 896 leaders and 143 countries over the period from 1981 to 2010. I address self-and donor-selection biases by including leader fixed effects in the regression analysis, in addition to the country and year fixed effects. In result, I find that, on average, the US allocates 30 percent more bilateral aid to US educated leaders with right-leaning political beliefs compared to those with left-leaning political beliefs. Heterogeneity analysis reveals that these findings are driven by right-leaning US leadership.