Foreign aid increases for defaulting countries, defying punishment expectations.
The study looked at whether countries reduce foreign aid to punish other countries that can't pay their debts. The researchers found that when a country defaults on its debt, other countries don't cut their aid. In fact, some countries even increase the amount of aid they give to the defaulting country. Overall, the amount of foreign aid given to countries that default actually goes up by about 6.4%. This shows that foreign aid is not used as a punishment for countries that can't pay their debts.