Discussion paper
DP19332 The Effect of Foreign Aid on Migration
Policymakers advocate for foreign aid to reduce migration. This study is the first to examine this policy's global effectiveness with micro data. We combine data on World Bank project announcements and disbursements from 2008-2019 with survey data on migration preferences of one million individuals worldwide and bilateral migration flows. Employing event studies and instrumental variable regressions, we find that in the short term, aid improves expectations of the future and trust in institutions, reducing individual migration preferences and asylum seeker flows. In the longer term, aid increases incomes, leading to more regular migration, consistent with the 'mobility transition' theory.
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