THREE ESSAYS ON U.S. FOREIGN ASSISTANCE SPENDING AND U.S. POLITICO-MILITARY INTEGRATION

Abstract

Simulations show that recipient nations are directly impacted by U.S. foreign assistance spending (in the form of U.S. economic and military aid) in a manner similar to transfer payments, spurring growth, and easing liquidity constraints. U.S. foreign assistance spending is often accompanied by U.S. politico-military integration, which is defined by the presence of the: (1) receipt of U.S. economic aid, (2) receipt of U.S. military aid, and (3) integration into the U.S. security apparatus through hosting U.S. troops and/or bases or through military or political treaties. Using a new comprehensive RAND database of all U.S. security-related agreements since 1955, I create a new database showing which country-years have active (a) U.S. military treaties (b) U.S. political treaties. Also new is the inclusion of David Vine's Base Nation database, detailing the location and existence of all recognized, unrecognized, and U.S.-funded bases. Lastly, I update another of RAND's databases, one detailing U.S. troop deployment abroad to include the most recent years.Empirical analysis shows a more complicated set of results than those derived in the simulations. Using deep lags and controlling for politico-military integration and U.S. military aid, I find limited evidence that U.S. economic aid is effective in development. This associated positive impact of U.S. economic aid is never large enough to overcome the associated negative impact of U.S. military aid and U.S. politico-military integration. While U.S. political treaties show a slight impact on economic growth, U.S. military aid, U.S. military bases, and U.S. military treaties overwhelm any positive impact on growth and FDI, with a resulting net effect that is significantly negative for the recipient.