Bargaining power and U.S. military aid in the post-cold war era

Yu Wang

doi:10.35467/sdq/141351

Abstract

This study examines the effect of bargaining power on the allocation of U.S. military assistance. Conceptualising U.S. military assistance as an aid-for-policy deal, it applies a two-tiered stochastic frontier model to a data sample of the post-Cold War era. It shows that the bargaining effect accounts for a huge variation in U.S. military aid distribution. The volume of U.S. military assistance in equilibrium is lower than the baseline volume by 4% at the mean and by 6% at the median. The donor U.S. extracts a slightly larger portion of the transaction surplus at these central points. However, the game of surplus division is not always about equally strong hagglers as it may first appear. In fact, the quartile values show substantial variance in bargaining performance and, hence, an outcome of surplus division across transactions. The bargaining effect is highly significant in the allocation of U.S. military assistance in the post-Cold War era. The donor U.S enjoys a bargaining advantage at the mean and median, but rich variations are noticeable.

Highlights

In the past two decades, the growing empirical literature on the determinants of U.S economic assistance has considerably improved our understanding of the issue (Lai, 2003; Gibler, 2008; Demirel-Pegg and Moskowitz, 2009; Boutton and Carter, 2014; Wang, 2016)
The second and more important objective of this study is to investigate the effect of bargaining power on the allocation of U.S military aid
Conceptualising U.S military assistance as the outcome of aid-for-policy transactions immediately brings to light the effect of bargaining power on the allocation of U.S military aid

Summary

Introduction

In the past two decades, the growing empirical literature on the determinants of U.S economic assistance has considerably improved our understanding of the issue (Lai, 2003; Gibler, 2008; Demirel-Pegg and Moskowitz, 2009; Boutton and Carter, 2014; Wang, 2016). There have been few, if any, empirical studies that have presented systematic evidence bearing directly on the determination of U.S military aid since the landmark piece by Poe and Meernik (1995). Our knowledge of the issue based on systematic empirical research is limited to the mid-1990s. This academic status quo is unsatisfactory for at least three reasons. Existing studies have shown that U.S military assistance has controversial social-political consequences in aid-recipient countries (Cingranelli and Pasquarello, 1985; Khilji and Zampelli, 1994; Bapat, 2011; Sandholtz, 2016; Boutton, 2019). A well-built literature on U.S military aid can improve our ability to predict the chance and severity of these consequences

Objectives

Results

Conclusion