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US economic assistance to two Micronesian nations: Aid impact, dependency and migration

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The USA provides economic assistance to the Federated States of Micronesia and the Republic of the Marshall Islands under the Compacts of Free Association. Both economies demonstrate three of the four MIRAB components: migration, aid and bureaucracy. Only the remittance structure has not developed. Significant US assistance supported large government sectors in both nations. Reductions in US assistance of over a 17-year period led many island citizens to migrate to the USA. However, to date, remittances have not been substantial. In addition to structural challenges, both nations face institutional constraints including poor governance and lack of accountability over assistance. To improve future growth through more effective use of US assistance, these institutional constraints must be overcome. Future US assistance to both nations will fall over the next 20 years, putting pressure on the island governments and will likely contract their economies. The need for remittance streams is likely to increase. New Compact assistance structures strive to improve aid accountability.
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Keywords: Compact of Free Association; Federated States of Micronesia; Republic of the Marshall Islands; development aid; migration

Document Type: Research Article

Affiliations: 1: US Government Accountability Office (GAO), 441 G Street NW, Washington, DC 20548, USA. (E. Friberg); (K. Schaefer), Email: 2: US Government Accountability Office (GAO), 301 Howard Street, Suite 1200, San Francisco, CA 94105, USA.

Publication date: 2006-04-01

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