Infrastructure aid for resource trade? The crossroads of strategy and sustainable development

In this paper, we investigate the claim that rich countries use development aid to ensure access to natural resources. We provide a theoretical model that suggests that even an altruistic donor may be inclined to allocate a higher share of their aid expenditure on infrastructure and other trade promoting measures if they rely on the recipient’s resource exports for their own production. We use a panel dataset from 2001 to 2011. Our results suggest that bilateral resource trade on average positively affects the number of infrastructure projects and the average size of projects. The effect seems to be driven mostly by fuels and road infrastructure projects. While the effect of resources is weaker for landlocked countries, we find that the transport capacity of the recipient’s fleet of bulk carriers —used in the maritime transport of many resources— reinforces the effect of resources on infrastructure aid. Finally, we find a decreasing influence of resources over time.

Author: Handrik; Thaís; Camélia, Kruse; Núñez Rocha; Turcu
Volume: 2020.06
Publisher: INFER
Year: 2020
No. of pages: 32
Working papers