Aid and social cohesion

A plethora of work has been done on the effectiveness of foreign aid. However, virtually none of the previous cross- country macro studies have 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 channeled 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 foreign aid has a strong, positive, and significant relationship with social cohesion. Moreover, the results reveal that in less cohesive countries aid is positively and significantly associated with social cohesion; but this relationship becomes insignificant, statistically, in more cohesive societies. The main results are robust to various specifications, estimation procedures, and measures of aid used.