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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. 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.
  2. Toke, A.S. & Albornoz, F. & Gassebner, M., 2012. "The Golden Hello and Political Transitions," Cambridge Working Papers in Economics 1241, Faculty of Economics, University of Cambridge.
  3. Niklas Potrafke, 2013. "Democracy and countries with Muslim majorities: a reply and update," Public Choice, Springer, vol. 154(3), pages 323-332, March.
  4. Niklas Potrafke, 2013. "Policies against Human Trafficking: The Role of Religion and Political Institutions," CESifo Working Paper Series 4278, CESifo Group Munich.
  5. Rode, Martin & Gwartney, James D., 2012. "Does democratization facilitate economic liberalization?," European Journal of Political Economy, Elsevier, vol. 28(4), pages 607-619.
  6. Audrey Menard, 2012. "Why foreign aid does (not) improve democracy?," Working Papers of BETA 2012-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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