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A Quantitative and Qualitative Study of the Impact of Swedish Foreign Aid on the Palestinian Economy

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A Quantitative and Qualitative Study of the Impact of Swedish Foreign Aid on the Palestinian Economy STOCKHOLM UNIVERSITY Department of Economic History and International Relations Master's Thesis in International Relations with specialization in Global Political Economy Spring Term 2021 Student: Waris Miratif Supervisor: Jonathan Michael Feldman A Quantitative and Qualitative Study of The Impact of Swedish Foreign Aid on the Palestinian Economy Keywords: Aid Effectiveness, Economic Growth, Two-Gap Model, Corruption, Occupation i Abstract This thesis contributes to the scholarship on aid effectiveness by evaluating the economic impact of Swedish foreign aid on the Palestinian economy (GDP) from 1999 to 2019. Econometric approaches have often been used in previous studies to assess aid effectiveness, but they are not sufficient for establishing clear conclusions, especially in a unique conflict- affected economy such as Palestine. Therefore, this study combines a mixed methods research approach involving qualitative and quantitative approaches. The primary research question is: “To what extent has Swedish foreign aid significantly contributed to the Palestinian economy during the past two decades from 1999-2019?” Two sub-questions follow the main research question: “To what extent has aid effectiveness in Palestine been affected by corruption in the Palestinian Authority and the Israeli occupation during the past two decades. The thesis uses a two-gap model of the economic growth theory by employing different techniques like inferential and descriptive statistics (quantitative research) followed by a content analysis and interviews (qualitative research) to answer the research questions. Results from the descriptive and inferential statistics and the content analysis show that Swedish aid positively affects the Palestinian economy but is limited by countervailing factors. The effectiveness of aid is constrained by the Israeli occupation and corruption in the Palestinian Authority (PA). ii Acknowledgements First and foremost, I want to thank the Swedish International Development Cooperation Agency (Sida) and the Department of Economic History and International Relations at Stockholm University for giving me the opportunity to travel to Palestine and Israel and conduct fieldwork through Minor Field Study (MFS) scholarship program. I am truly grateful for the unique experience and would thank all the interviewees who participated in this study. I want to thank my supervisor, Jonathan M. Feldman, for the guidance and inspiration he has provided me during this entire process. Last but not least, I wish to thank Fia Sundeval, the convener and main teacher of the master thesis course, for her guidance and instructions throughout this course. iii Abbreviations and Acronyms CA Civil Administration DAC Development Assistance Cooperation DoP Declaration of Principles EU European Union FBA Folke Bernadotteakademin (Swedish Agency for Peace, Security and Development) FDI Foreign Direct Investment GDP Gross Domestic Product GNP Gross National Product ILO International Labour Organization IMF International Monetary Fund LDCs Least Developed Countries NGOs Non-Governmental Organizations NIS New Israeli Shekel ODA Official Development Assistance OECD Organization for Economic Co-operation and Development OLS Ordinary Least Squares PA Palestinian Authority PCBS Palestinian Central Bureau of Statistics PLO Palestinian Liberation Organization PMA Palestinian Monetary Authority SI Swedish Institute Sida Swedish International Development Cooperation Agency SMEs Small Medium Enterprises UN United Nations UNCTAD United Nations Conference on Trade and Development USD United States Dollar UNRWA United Nations Relief and Works Agency for Palestine Refugees in the Near East WB World Bank WBGS West Bank and Gaza Strip iv Table of Contents Abstract................................................................................................................................................................... ii Acknowledgements ............................................................................................................................................... iii Abbreviations and Acronyms ................................................................................................................................ iv Table of Contents.................................................................................................................................................... v 1. Introduction ...................................................................................................................... 1 1.1 Overview ................................................................................................................................. 1 1.2 Need for the Study .................................................................................................................. 1 1.3 Statement of the Problem ........................................................................................................ 2 1.4 Objectives of the Study ........................................................................................................... 3 1.5 Organization of the Thesis ...................................................................................................... 3 2 Background ....................................................................................................................... 4 2.1 Overview ................................................................................................................................. 4 2.2 Background on Foreign Aid to Palestine ................................................................................ 5 2.3 Swedish Development Cooperation with Palestine ................................................................ 7 3 Literature Review and Theoretical Framework .......................................................... 11 3.1 Introduction ........................................................................................................................... 11 3.2 Literature Review .................................................................................................................. 11 3.3 Theorizing the Dependent Variable ...................................................................................... 15 3.4 Theorizing Foreign Aid’s Contribution in a Palestinian Context ......................................... 17 3.5 Theorizing Corruption and Israeli Occupation ..................................................................... 17 3.6 Summary ............................................................................................................................... 18 4 Methodology .................................................................................................................... 20 4.1 Introduction ........................................................................................................................... 20 4.2 From Theory to Method ........................................................................................................ 20 4.3 Research Strategy .................................................................................................................. 21 4.4 Quantitative and Quantitative Research and Sources ........................................................... 21 5. Empirical Section I ......................................................................................................... 26 5.1 Quantitative Analysis – (Stage I) .......................................................................................... 26 5.2 Summary ............................................................................................................................... 30 6. Empirical Section II........................................................................................................ 30 6.1 Qualitative Analysis – (Stage II) ........................................................................................... 30 6.2 Qualitative Analysis – (Stage III) ......................................................................................... 37 7. Conclusions...................................................................................................................... 47 7.1 Introduction ........................................................................................................................... 47 7.2 Swedish Foreign Aid ............................................................................................................. 48 7.3 Corruption ............................................................................................................................. 49 7.4 The Israeli Occupation .......................................................................................................... 49 v 7.5 Summary ............................................................................................................................... 50 7.6 Future Research .................................................................................................................... 50 8. References ........................................................................................................................ 50 Appendix 1 ........................................................................................................................................................... 55 Appendix 2 ..........................................................................................................................................................
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