Working Paper
Aid and social cohesion

A plethora of work has been done on the effectiveness of foreign aid. However, virtually none of the previous studies has investigated the impact of aid on social cohesion.

Yet, in order to promote the achievement of the targets in SDG 16, donors and global partners of developing countries have put emphasis on social cohesion in recent decades. As a result, large amounts of development aid have been channelled into many developing countries to support the building of peaceful, just, and inclusive societies.

The question is, however, can aid bolster cooperation and respect among different identity-based groups in a country? We contribute to the literature by exploring the effect of development aid on social cohesion for a relatively large panel of aid-recipient countries.

Our empirical results suggest that aid produces a strong, positive, and significant effect in improving social cohesion. Moreover, the results reveal that the effect of aid is positive and significant in countries characterized by low social cohesion but becomes insignificant in more cohesive societies. The main results are robust to various specifications, estimation procedures, and measures of aid used.