Aid, Trade and International Politics: An Assessment of the Growing Influence of Emerging Economies

• Applicant: Professor Dr. Axel Dreher
• Subject Area: Economic Policy, Applied Economics
• Term: from 2011 to 2014
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 193251794

The project assesses empirically the growing importance of emerging economies in international trade and foreign aid. First, building on earlier work, we explore empirically factors along various dimensions (military, economic, political, social/cultural) that help us quantifying a country’s global importance. This will enable us to assess the shift in power from a bipolar world to a polycentric setting. In particular, we seek to analyze the capability of a nation to assert its interests and also to examine its vulnerability to pressure from other countries. Second, the project will examine econometrically the link between international political relations and international trade. Emerging economies are rapidly gaining in importance as trading partners for established world powers. We analyze how emerging powers use these trade interdependencies to enforce their political agenda. Emphasis will be put on the role of diplomatic and cultural ties in shaping trade patterns. Third, light will be shed on the determinants of emerging donors’ aid budgets and of their allocation of development aid. Given the lack of prior empirical research on this issue, the members of the project will start by collecting data for emerging donors’ foreign assistance. It will then be tested to which extent political factors are predominant in emerging donors’ aid flows. A particular focus will be placed on the analysis of the determinants of development aid provided by China and India, two of the most important so-called new donors.

• DFG Programme: Research Grants