Foreign aid, bilateral asylum immigration and development

This paper measures the links between aid from 14 rich to 113 developing economies and bilateral asylum applications during the years 1993 to 2013. Dynamic panel models and Sys-GMM are used. The results show that asylum applications are related to aid nonlinearly in a U-shaped fashion with respect to the level of development of origin countries, although only the downward segment proves to be robust to all specifications. Asylum inflows from poor countries are significantly and negatively associated with aid in the short run, with mixed evidence of more lasting effects, while inflows from less poor economies show a positive but non-robust relationship to aid. Moreover, aid leads to negative cross-donor spillovers. Applications linearly decrease with humanitarian aid. Voluntary immigration is not related to aid. Overall, the reduction in asylum inflows is stronger when aid disbursements are conditional on economic, institutional and political improvements in the recipient economy.