Global Flow of Foreign Aid and Change in Recipients’ Local Labor Institutions

Table 6

Instrumental variable estimation results and other robustness checks.

	Panel A: IV		Panel B: Continent Subsample			Panel C: Crisis Subsample		Panel D: Alternative Dependent Variables
	FE	RE	European donor	African recipient	Asian recipient	Before 2008	After 2008	valid_dis	max_trial	seve_pay	redund_pay
Actual_Aid_Econ	−12.8793 (−1.835)	−15.9141 (−1.789)	−0.1414 (−2.196)	−0.0654 (−2.054)	−0.1513 (−2.435)	−0.0756 (−2.080)	−0.0585 (−1.423)	−0.1711 (−2.564)	−0.3001 (−2.367)	−0.2751 (−3.596)	−0.3748 (−2.991)
No. of Obs.	51,858	51,858	34,792	19,293	13,084	28,552	23,306	7,354	7,354	7,354	7,354
Wald/F statistics	1,524.31	1,748.75	265.97	198.44	78.45	224.40	89.67	60.95	55.80	80.48	99.29
Adjusted	N/A	N/A	0.8654	0.9122	0.8468	0.8967	0.9378	0.0688	0.0794	0.0913	0.102

Notes: Except for the first two IV estimations (Wald statistics instead of F statistics are reported for these two specifications as well), all other regressions include an intercept and are estimated by the pooled OLS model, with White’s correction of heteroskedasticity. t-statistics are in parentheses. , , and denote significance at 1%, 5%, and 10% levels, respectively. All controls as well as time- and pair-country-fixed effects are included in all regressions, but not reported. In Panels A–C, the dependent variable is always the overall labor institutional distance used previously. In Panel D, the alternative dependent variables are distance computed based on raw indicators sourced from the employment protection legislation database by the International Labor Office at Geneva. We select four representative summary indicators in the area of terminating regular labor contracts across the world. valid_dis stands for valid grounds for dismissal, max_trial means the maximum probationary (trial) period, seve_pay represents severance pay, and redund_pay is redundancy pay. We also introduce step-dis, which measures the procedural requirements for dismissal, which is not significantly associated with our aid variable, although the sign of the coefficients is consistent with our expectations.