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7. Summary and policy recommendations
The aim of this thesis was to assess different developmental aspects in a global and historical perspective by using an alternative, non-monetary approach to well-being.
Moreover, the impacts and the effectiveness of foreign aid as a tool to reduce absolute and relative deprivation were analysed in this context. After introducing fundamental concepts, ideas, and research questions in the first chapter, chapter two was dedicated to the historical development of educational inequality during the 18th to 20th centuries, with a particular focus on the role of globalisation in increasing or reducing the educational gap between the rich and the poor. While the analysis focused on Latin American educational inequality during the First Era of Globalisation (1850-1913), a broader set of developing countries was looked at for the mid- to late-20th century. The empirical results show that the First Era of Globalisation was characterised by increasing educational inequality, while 20th century globalisation led to a reduction in educational inequality. Moreover, there is strong evidence for a modified Kuznets’
inverted U hypothesis: educational inequality was rising with GDP per capita until 1913 and fell with GDP per capita after 1945.
Inequality also played a significant role in the subsequent chapter: the determinants of civil war onset were assessed empirically for a global sample since 1816. In particular, we evaluated whether countries with unequal living conditions were more likely to be hit by a civil war. Previous studies on civil war risk had difficulties in empirically examining the effect of inequality on civil unrest as data on traditional indicators of inequality, such as Gini coefficients, are often scarce, particularly for the poor and conflict-struck regions in the world. In this thesis, an innovative approach for measuring inequality was introduced by using the inequality of human height, which is closely related to inequality in monetary welfare. Inequality was identified as a main force driving the onset of civil conflicts, being even more decisive than absolute poverty levels.
We can draw several conclusions from the results of chapters two and three.
First, educational inequality has evolved due to external factors and is not an established fact that cannot be tackled. Second, globalisation in the 20th century has not harmed educational outcomes in developing countries but has probably even been development enhancing. Last but not least, if inequality (in well-being) is not reduced, it might
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trigger new violent conflicts, leading to a (further) destabilisation of the respective country and probably even to a vicious circle of inequality, poverty and violence.
One possibility to fight inequality and poverty in general is to provide foreign aid to developing countries. Whether foreign aid has turned out to be an efficient development tool or rather produced unwanted effects was examined in chapters four, five, and six. While the first of these three chapters explored the impact of overall development assistance on well-being, the subsequent chapters offered a detailed insight into the effects of nutritional support, i.e., food aid.
In chapter four, the impacts of overall foreign development assistance provided between the 1960s and late-2000s on the biological standard of living were assessed for a global sample. While a large strand of literature has already provided empirical evidence that aid has weak or even negative impacts on economic growth (Boone 1996;
Hansen and Tarp 2001; Easterly et al. 2004, among others), this thesis contributes to the discussion by showing that similar effects can be found for anthropometric outcomes for certain time periods: the results indicate that aid had significantly negative effects on well-being in the short-run during the 1960s to late-1970s. However, an equally negative impact of overall aid on anthropometric indicators was not found for later periods. In the long run, increases in aid flows were even positively related to well-being outcomes, but not significantly so. The change from significantly negative impacts of overall aid until the late-1970s to neutral effects in later periods can partly be attributed to the change in policy designs that increased the efficiency of foreign aid.
However, positive impacts resulting from an improved policy design of development assistance seem to be offset by adverse effects evoked, for instance, by rent-seeking behaviour.
The subsequent two chapters took a closer look at sector-specific aid that was aimed directly at guaranteeing food security in developing countries. In a first step, we assessed whether food aid was able to create the desired effect of improving nutritional outcomes (chapter 5). Food aid flows provided between 1995 and 2010 were therefore analysed for a global sample with regard to their impact on children’s height and weight, key measures of the impact of food aid on human well-being. The results provided evidence that food aid was significantly and negatively related to stunting for the period under observation. However, a clear causal direction could not be identified
Chapter 7. Summary and policy recommendations
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due to a lack of suitable instruments for food aid and the missing possibility of using GMM models as a result of the data structure.
Finally, chapter six analysed whether there is empirical evidence for the persistent belief that food aid causes disincentives for recipient countries’ agricultural production. More precisely, it has often been claimed that food aid increases food supply, thereby leading to a decrease in food prices which makes food production unprofitable for farmers. Moreover, repeated nutritional support is believed to create disincentives for the government to invest in the agricultural sector. The results did not confirm the “disincentive hypothesis”. On the contrary, nutritional support was found to be significantly related to future wheat production, while no significant food aid effects were found for the total agricultural production. In summary, chapter five and six contribute to the aid effectiveness literature by showing that the mostly negative presumptions concerning food aid cannot be underpinned by empirical evidence.
What conclusions can be drawn from this thesis and which policy recommendations should be derived on the basis of the results provided here? First of all, it has been shown that inequality is not an inevitable fate but has grown historically and can therefore be combatted. Second, if inequality is not reduced, it could significantly trigger political destabilisation. One tool to fight inequality is foreign development assistance: chapter four to six have shown that foreign aid and, in particular, food aid is better than its reputation. Moreover, the results suggest that foreign aid has become more effective in tackling underdevelopment due to more intelligently-designed aid policies. A key conclusion that can be drawn from this thesis is therefore that it is not enough to simply increase the amount of foreign aid, as Jeffrey Sachs (2005) requested in his bestselling book “The End of Poverty: Economic Possibilities of our time”. Rather, it seems to be essential to improve the efficiency of foreign aid by reducing the risk of fungibility, rent-seeking-behaviour, corruption, and wrong targeting.
Future research should aim at finding suitable instruments for food aid and improve the data base for anthropometric indicators to be able to address the question of causality.
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