The impact of foreign aid on migration revisited
While policymakers hope to stem migration flows by giving foreign aid, existing empirical evidence points in the opposite direction: by loosening budget constraints, aid tends to encourage people to emigrate. In this paper, the Kiel Institute for the World Economy (IFW) revisits the aid-migration link using a substantially extended and adjusted econometric approach based on a gravity model of international migration.
In contrast to the previous literature, the researchers obtain evidence of a negative relationship between aid and emigration rates. This even holds for the poorer part of recipient countries, which suggests that the budgetary constraint channel does not play a significant role in shaping migration decisions. The most plausible explanation for these contrasting results is that, unlike in previous studies, the IFW uses migrant flows rather than migrant stocks as the dependent variable.