How do Aid for Trade inflows and design affect developing countries' levels of income inequality?

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Aid for Trade (AfT) is Official Development Assistance (ODA) targeted at helping developing countries better harness the benefits from global trade (Busse et al., 2012). As an ODA component, AfT must have, as its main objective, the promotion of development or welfare (Ali et al., 1999).Since its establishment, AfT has shown unprecedented growth, both in absolute terms and relative to other ODA components. Accordingly, the international community has become increasingly interested in measuring the effectiveness of the initiative.Two clear strands of work have emerged in the AfT literature. The first one broadly belongs to the school of neoclassical economics and shows a strong preference for quantitative work, with a narrow focus on trade-related outcomes (e.g., time and cost of trade, export volume, export revenue). Results are largely positive, yet there is little discussion on the likelihood that these may (not) translate into improved development and socioeconomic conditions (see Cali and te Velde, 2011; Busse et al., 2012; Ferro et al., 2014).The second strand is closer to the discipline of political sciences and has paid more attention to the welfare and development concerns, normatively problematising the AfT initiative. Critics argue that AfT is mostly driven by donors' own commercial interests and that the premise of AfT discourse (i.e., financial assistance to help developing countries fulfil their WTO negotiations) is morally questionable since those obligations are often damaging to their development prospects (Langan & Scott, 2014).The first line of work fails to draw a convincing rationale for why AfT has a place as an ODA component and why it should be good for development, instead unconvincingly building on assumptions that increased exports and less costs to trade will inevitably lead to improved socioeconomic conditions. On the other hand, the second line has not yet empirically tested their criticisms and the effect these have on the relationship between AfT and socioeconomic conditions for developing countries. This project aims to build this bridge by offering an empirical account of the development-oriented merits of AfT, in particular focusing on indicators of income inequality. Accordingly, this project will answer the research question 'how do Aid for Trade inflows and design affect developing countries' levels of income inequality?', using a mixed methods approach.