April 27, 2026, Filed Under: Working PaperGeopolitical Payoffs EMPCT Working Paper Series No. 2026-0387 pages | PDF Download | PDF in Browser Citation:Levchenko, Andrei A., Nitya Pandalai-Nayar, and Henry Young, “Geopolitical Payoffs”, April 2026 Andrei A. LevchenkoUniversity of MichiganNBER and CEPR Nitya Pandalai-NayarUniversity of Texas at Austinand NBER Henry YoungUniversity of Michigan AbstractWe estimate and quantify the role of foreign aid in increasing donors’ market access. Using newlydigitized data on aid flows from countries including the Soviet Union and China during the ColdWar period (1962-1989), we find that higher bilateral aid significantly raises exports from the donorto the recipient. This suggests that foreign aid is associated with improved market access for thedonor. We quantify the market access benefits of foreign aid using a trade model calibrated to theCold War period. We find that welfare gains to the donors from improved market access amountto one-third of the cost of disbursement.
