US-Soviet Aid and Fiscal Extractive Capacity Variations in the Countries of the South
The fiscal effects of aid are a crucial aspect for evaluating aid effectiveness and understanding the state capacity-building processes in countries of the South.Despite the fact that the countries of the South generally received large amounts of aid from the United States and the Soviet Union during the Cold War,variations in fiscal extraction capacity and divergences in governance performance were observed among different countries.Why were some countries able to overcome the negative impacts of foreign aid and enhance their tax extraction capabilities,while others struggled to escape the fiscal traps induced by aid?By evaluating the fiscal effects of aid from two different analytical perspectives,this paper ar-gues that the rent distribution incentives that decision-making elites face are key antecedents in prompting countries of the South to adjust their tax policy and improve fiscal extraction capacity in the short term.By analyzing the fiscal effects,the marginal effects of US and Soviet aid,and the moderating fiscal effects of relative coalition size on US and Soviet aid in panel data,along with reporting the results of a large sample model and evidence of typ-ical country cases on the grant factors in US economic aid,this paper finds that the boost in fiscal extractive capacity for the countries of the South often occurred when the rent allo-cation order faced crises among decision-making elites.In particular,less US and Soviet military aid,lower grant proportions in US economic aid,higher repayment proportions in Soviet economic aid,smaller alliance sizes,and"one-sided"foreign aid acceptance strate-gy among recipient countries were conducive to enhancing the motivation of decision-mak-ing elites to improve fiscal systems,leading to positive variations in fiscal extractive capaci-ty.In the face of the increasingly geopolitical competition and strategic value,countries of the South need to nurture endogenous development dynamics,mitigate the adverse impacts of the international developmental environment,and achieve sustainable state capacity-building.
fiscal effects of aidUS-Soviet Cold Warcountries of the Southstate ca-pacity buildingrent allocation incentive
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