Aid and regional inequality in Myanmar

Description

What does aid to do regional inequality? From Brexit to the last US elections, recent political events have put into sharp relief the growing divide between rural and urban parts in industrialized countries. This divide is a ‘meta-divide’, overlaying differences in income, culture and social structures and thereby gaining political momentum. More importantly, we see that rapid socio-economic transformations make matters much worse for developing countries. This, in turn, has huge implications for grievances, conflicts and political contestation: Regional inequality has been related to civil war & conflict, especially where related to ethnic or other fractionalization, demands for secession and regional redistribution. While the main drivers of the rural-urban divide and regional inequality are well-known, we know less about the role of official development aid (ODA) in this process. Does it reduce differences or does it rather reinforce them? Instead, most of the literature on ODA has focused on the effects of aid on growth. Only very recently, there are some aggregate studies on its effects on national income inequality, but little on its effects on inequalities between regions. In this paper, we use Myanmar as a case study to investigate the relationship between regional inequality and development aid. Myanmar is a particularly revealing case in as much as political liberalization since 2011 have led to a socio-economic transformation that is much more rapid than those of its neighbouring countries. The relatively long and strong isolation from the world market has triggered a time-lapsed version of processes which are usually much slower and more difficult to observe. Moreover, we also know that Myanmar is a notoriously difficult case for rolling out aid to the periphery with its long heritage of resisting centralization and its decades-long civil wars.Studying the relationship between regional inequality and aid for a specific country also allows us to draw on different sources, both qualitative and quantitative. Starting with the latter, we have compiled a dataset on regional inequality using night-time luminosity data for states and regions in Myanmar, and match this data with information on aid flows to different regions. We also control for other factors influencing regional inequality and see what role ODA, and especially the recent uptake in size and quantity of these flows play. Given that the quality of information for Myanmar is also limited, we complement our analysis with some qualitative evidence in the form of interviews and casuistic information for specific donors and projects. This helps us to not only focus on macro-correlations but also trace some more fine-grained effects of aid for regions in detail. We find that although regional inequality is primarily driven by international opening in general, aid flows also seem to contribute to further divergence. We conclude with broader implications for scholars, donors and the policy community.

Period	3 Dec 2018
Held at	University of Erfurt, Germany
Degree of Recognition	International