Welfens, P.J.J.: Effective Aid for Ukraine by OECD Countries

Welfens, P.J.J.: Effective Aid for Ukraine by OECD Countries

JEL classification: F35, F51, H63, H84, H89

Key words: Foreign aid, Ukraine, Russia-Ukraine War, Expenditures on Refugee Support, OECD Countries, Media Attention, Kiel Institute for the World Economy

Summary:

The Russo-Ukrainian war has given rise to a broad discussion about adequate aid for Ukraine across the Western world and within the OECD country group in particularly. Essentially, policymakers and the wider public would like to have an economic aid indicator which allows to understand whether or not individual donor countries are carrying a “fair” share of the burden: Humanitarian aid would naturally include the commitments of OECD countries for Ukrainian refugees plus other humanitarian expenditure items. The sum of humanitarian, financial and military aid provided by various countries to Ukraine has been presented by the Kiel Institute for the World Economy (Kiel IfW) in April 2022 and thus many new data points became available, including a table with a ranking of the countries on the basis of combined aid – relative to GDP – which shows that the aid ratio of the US is larger than that of the whole EU, including EU funds for Ukraine. The IfW, however, omits the commitments with regard to refugee support made by OECD countries which, for most countries considered, indeed represents the largest share of overall support commitments for the Ukrainian people. The IfW approach is quite misleading as it ignores commitments of the respective OECD countries for Ukrainian refugees. If one includes the relevant expenditures and commitments for 2022, the donor country ranking looks quite different from the ranking calculated by Antezza et al. (2022). It is also noteworthy that the press release by the Kiel Institute for the World Economy on publication of the IfW Discussion Paper No. 2218 does not mention that the IfW summary aid indicator for support for the Ukraine does not take expenditures for Ukrainian refugees into consideration, while the paper mentions this peculiar point – this might be an error in the press release. The IfW has emphasized that its calculations show that US support clearly exceeds that of the EU in nominal terms. The Kiel IfW press release seems to have been aimed at arousing maximum media attention on the basis “bad news is good news” which might be acceptable for selling newspapers, but which is clearly in contradiction to the concept of sound research in Economics. As is shown in this research note, the commitments of EU countries (plus the EU’s own commitment) – with commitments for refugees included - were about five times higher than that of the US in the period February 24th to March 27th, 2022. Moreover, the correct ranking for the sum of humanitarian, financial and military aid - including commitments for Ukrainian refugees - in the EIIW approach differs significantly in most cases from the aid-GDP ratio ranking of the Kiel IfW. In the analytical discussion, the Russia-Ukraine conflict shocks are partly viewed through the lens of the Heckscher-Ohlin theorem, the Stolper-Samuelson theorem and the Rybczynski theorem, respectively; it is argued that there is some equivalence of the Heckscher-Ohlin theorem and the Rybczynski theorem.

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