We identify a process that drives aid allocation and is exogenous to the rights and governance in recipient countries: the rotating presidency of the Council of the European Union (EU Council). Since the country holding the presidency is determined exogenously, the set of countries that happen to be former colonies of the president is also exogenous. We find that when a country’s former colonizer is the president of the EU Council during the budget-making process, the country is allocated considerably more EU aid. This exogenous shock to a recipient country’s aid allocation serves as the basis of our estimation strategy. We use the colonial relationship to the current EU Council president as an instrumental variable for the amount of foreign aid from the European Community in the following year
Establishing that the EU presidency has a significant influence on its aid budget and recipients, the authors show that a strong and significant positive effect exists of being a former colony (of the country holding the EU presidency) in being sanctioned EU aid. Also,
The effect on CIRI Human Empowerment occurs immediately, and then (nearly monotonically) declines each year, demonstrating the short-lived nature of the effect of the exogenous shock to foreign aid. Similarly, the effect of Polity peaks in year t + 3 and then rapidly declines. The delayed effect for Polity is understandable, as the CIRI Human Empowerment score measures behavioral changes which can show up quickly, such as freer speech and association, while Polity measures more structural changes that may take time to show up, such as electoral freedom…Taken in sum, the year-by-year effects point to the same conclusion: the increase in foreign aid induced by the rotating presidency yields non-trivial, but relatively short term improvements in human rights and governance.
To sum up,
We find that the EU’s ‘recipe’ of success can work beyond the scope of potential members; even when the benefits offered are substantially smaller than the benefits of membership, the EU can still elicit movement in rights and freedoms. Broadly speaking, our paper provides striking evidence for the ability of an international institution to widely improve human rights and governance