Geopolitics and Aid Allocation - A Subnational Analysis of US, Chinese, and German Aid

Geopolitics is back as one of the central motives for providing development aid. This article uses geocoded aid data at the subnational level to examine the extent to which geopolitical considerations influence the allocation of development aid. I identify the US, China, and Germany as the most important geopolitical actors and Asia as the most contested area in terms of geopolitics. The baseline results show that geopolitical considerations matter for aid allocation. US aid projects are significantly affected by Chinese aid projects in the previous period. A similar effect cannot be found for Germany. When interacting the aid terms with an indicator of the geopolitical importance of the recipient country, Chinese aid becomes significant and positive for key US countries. The same does not hold for the effect on German aid. The results suggest that the US allocates its aid much more to pursue its geopolitical interests than Germany.