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When does more aid imply less democracy? An empirical examination

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  • Irene Vlachaki

    ()
    (European Commission, Brussels, Belgium)

  • Sarantis Kalyvitis

    ()
    (DIEES, AUEB)

Abstract

Foreign aid flows have increased considerably during the last decades, targeting, apart from development objectives, goals related to democracy. In this paper we investigate whether aid has affected the political regime of recipient countries. To this end, we use annual data on Net Official Development Assistance covering 64 aid-recipients. Because of data limitations, we cover the period 1967-2002. We find that aid flows decreased the likelihood of observing a democratic regime in a recipient country. This effect is sensitive to economic and social conditions. The negative relation between aid and democracy is moderated when aid flows are preceded by economic liberalization. Aid from the U.S. has a non-significant effect on the political regime of recipients.

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Bibliographic Info

Paper provided by Athens University of Economics and Business in its series DEOS Working Papers with number 1125.

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Date of creation: 29 Jul 2011
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Publication status: Forthcoming in European Journal of Political Economy
Handle: RePEc:aue:wpaper:1125

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Keywords: democratization; foreign aid; binary model; endogeneity;

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Cited by:
  1. Rode, Martin & Gwartney, James D., 2012. "Does democratization facilitate economic liberalization?," European Journal of Political Economy, Elsevier, vol. 28(4), pages 607-619.
  2. Potrafke, Niklas, 2013. "Democracy and countries with Muslim majorities: A reply and update," Munich Reprints in Economics 19270, University of Munich, Department of Economics.
  3. Niklas Potrafke, 2013. "Policies against Human Trafficking: The Role of Religion and Political Institutions," CESifo Working Paper Series 4278, CESifo Group Munich.
  4. Grégoire ROTA-GRAZIOSI & Clémence VERGNE & Blanca MORENO DODSON, 2012. "Breaking the wave of democracy: The effect of foreign aid on the incumbent’s re-election probability," Working Papers 201231, CERDI.
  5. Kersting, Erasmus & Kilby, Christopher, 2014. "Aid and democracy redux," European Economic Review, Elsevier, vol. 67(C), pages 125-143.
  6. John Anyanwu & Andrew E. O. Erhijakpor, 2013. "Working Paper 184 - Does Oil Wealth Affect Democracy in Africa?," Working Paper Series 988, African Development Bank.
  7. Axel Dreher & Nathan Jensen, 2009. "Country or Leader? Political Change and UN General Assembly Voting," KOF Working papers 09-217, KOF Swiss Economic Institute, ETH Zurich.
  8. Audrey Menard, 2012. "Why foreign aid does (not) improve democracy?," Working Papers of BETA 2012-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  9. Aidt, Toke & Albornoz, Facundo & Gassebner, Martin, 2010. "The Golden Halo and Political Transitions," Proceedings of the German Development Economics Conference, Hannover 2010 48, Verein für Socialpolitik, Research Committee Development Economics.
  10. Zohid Askarov & Hristos Doucouliagos, 2013. "Does aid improve democracy and governance? A meta-regression analysis," Public Choice, Springer, vol. 157(3), pages 601-628, December.

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