Monday, August 31st
Cleo O’Brien-Udry (Yale), How Aid, Visibility, and Volatility Affect Incumbent Re-Election: Evidence from Kosovo
What happens when promised foreign aid doesn’t appear? Incumbents lose. While politicians have electoral incentives to claim credit for and promote aid projects in their localities, this behavior may backfire if donors do not provide adequate funding or support for the projects. Using the outcome of donor elections as an instrument for the underbudgeting of projects, I provide causal evidence that underbudget aid projects negatively affect incumbent re-election. However, this effect is isolated to visible aid projects. A case study of the World Bank’s withdrawal of support for a power plant in Kosovo before the national 2019 elections describes how political polarization of publicized aid may be a potential mechanism through which rescinded aid reduces incumbent re-election rates. For recipient incumbents, visible aid may have a high reward, but it comes with high risk.