Arms Sales and Foreign Aid: The German Case

Austin Baker

Abby Cooner

Prof. Vreeland

Krogh Honors Seminar

Research Question

German Arms Imports

German Foreign Aid

Independent Variable Dependent Variable

Hypothesis

• If a country imports German arms, they are more likely to receive German foreign aid.

How does this make sense?

Context• End of Cold War more open, competitive,

less polarized arms market– COCOM–Wassenaar Arrangement– EU

• Policy ≠ decisions (Davis 2002: 6)

• “Much of what goes by the name of foreign aid today is in the nature of bribes”

The Process

Foreign Country

German Arms Manufacturers

Federal Security Council

Chancellor

Federal Ministry

Buys Arms

Receives Aid BDSV

Export Permits

Methodology

• Stockholm International Peace Research Institute (SIPRI)–Arms transfers database

• OECD Data (1990-2009)• Challenge of Endogeneity

Top German Arms Importers and Aid Recipients

Top Ten German Arms Importers* (2006)

South Africa 528.00

Turkey 330.00Malaysia 310.00

India 15.00China 14.00Pakistan 12.00Jordan 4.00Chile 1.00Iran 1.00Albania 0.00

*Recognized ODA recipients in 2006, recorded in millions of TIV

Top Ten German ODA Recipients* (2006)

China 473.61

Iraq 449.17

Indonesia 261.35

Serbia 239.25

India 232.55Egypt 199.23Vietnam 154.61Turkey 116.77

Tunisia 79.05

Philippines 69.32

*Recognized ODA recipients in 2006, millions of constant 2011 dollars

           Table 2. Effect of German Arms Imports on Bilateral Aid received from Germany

Variable Model 1 Model 2 Model 3

Value of German Arms Imports 0.05** 0.06*** 0.05**

(2.39) (3.51) (2.55)

Membership on the UNSC 1.04* 1.18**

(1.91) (2.29)

U.S. Military Assistance 0.09** 0.10*

(2.37) (1.81)

Political regime type 0.02

(0.3)

Human rights record 0.3

(1.38)

Pariah state -1.58

(0.96)

War -0.52

(0.84)

ln(GDP per capita, real) 0.8

(0.38)

Value of German goods imported by their trade partner 0

(1.39)

Value of a trade partner’s goods imported by Germany 0

(1.6)

Number of observations 923 837 922

R-squared 0.26 0.36 0.27

Notes: All regressions include country and year fixed-effects and regional quartics. Numbers in parentheses are the absolute values of t-statistics. We mark absolute t-statistics with * if p <0.10 (statistical significance at the 10% confidence level); with ** if p<0.05 (statistical significance at the 5% confidence level); and with *** if p<0.01 (statistical significance at the 1% confidence level). Notes: All regressions include country and year fixed-effects and regional quartics. Numbers in parentheses are the absolute values of t-statistics. We mark absolute t-statistics with * if p <0.10 (statistical significance at the 10% confidence level); with ** if p<0.05 (statistical significance at the 5% confidence level); and with *** if p<0.01 (statistical significance at the 1% confidence level).

Notes: All regressions include country and year fixed-effects and regional quartics.

Conclusion

• Import arms receive more aid• Positive, statistically significant• Causal logic reinforced by data