Seminario The Price of Goodwill: Foreign Aid and Media Narratives in Developing Countries

Abstract

This paper examines how foreign aid shapes media narratives in developing countries and their sociopolitical implications. Exploiting the executive order pausing all programs administrated by the United States Agency for International Development (USAID) in January 2025 as a quasi-experimental shock, I analyze 1.7 million U.S.-related news articles from approximately 44,000 outlets across 130 developing countries. Employing a difference-in-differences design, I find that countries with greater pre-treatment U.S. aid dependency experienced significant declines in media sentiment scores toward the U.S. following the withdrawal. This effect is particularly pronounced in non-democracies and regarding political topics, suggesting state-directed media responses as a potential mechanism. Furthermore, these narrative shifts are associated with tangible sociopolitical outcomes, including increased anti-U.S. demonstrations and reduced travel to the U.S. These findings reveal that foreign aid creates dependencies extending beyond economic flows to shape information environments, with implications for both donor countries' strategic influence and recipient countries' domestic political stability.