The long-term impact of U.S. aid on poverty alleviation: the role of a seat in the Security Council of the United Nations

Fifty years of literature on aid-effectiveness has been inconclusive so far. The main challenges that remain are to properly identify the causal effect of aid on poverty alleviation and to dispose of reliable data on poverty. To confront the first problem we use the number of years a country has spent at the Security Council of the United Nations (UNSC) as the instrumental variable to explain the amount of U.S. economic aid received (Kuziemko and Werker, 2006). We also use multidimensional poverty data (OPHI, 2016), which is highly reliable. We estimate, for a sample of 64 developing countries, the impact of average aid received between 1946 and 1999 in reducing poverty between 2000 and 2014. Our results suggest that, despite the low transparency of these flows, a country that has spent at least two mandates at the UNSC between 1946 and 1999 has succeeded to significantly reduce the percentage of population living in multidimensional poverty by 0.33 % in the long run. The highest positive effect is observed through the increase in years of schooling (0.71 %) and, to a lesser extent, through the improvement of living standards (0.41 % on average).