The links between foreign aid and policies in developing countries have been at the forefront of the policy debate for decades. An emerging consensus touts aid selectivity as the solution to the failures of conditionality. In recent years, many recipients have implemented political reforms resulting in more democratic regimes. I show that donor influence depends on the aid budget being large enough relative to the recipient. I also demonstrate that if aid influences policies, the political equilibrium in democratic recipient countries is likely to change to the disadvantage of the political alternative favoured by the donor. This implies that aid selectivity should be applied cautiously.
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Paper provided by Cornell University, Center for Analytic Economics in its series Working Papers with number
04-12.
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Find related papers by JEL classification: D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation F35 - International Economics - - International Finance - - - Foreign Aid O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Craig Burnside & David Dollar, 2000.
"Aid, Policies, and Growth,"
American Economic Review,
American Economic Association, vol. 90(4), pages 847-868, September.
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