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Instability from trade and democracy: the long-run effect of aid

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  • Thierry Kangoye

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

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    Abstract

    Is there an effect of aid on democracy conditional on instability from trade? This paper reinvestigates the debated effect of aid on democracy with a new specification. We take advantage of previous empirical findings explaining the role of aid in mitigating the adverse effects of external shocks, and argue that in the long term, aggregate aid flows can potentially dampen the effects of terms-of-trade instability on the quality of democracy. An empirical investigation with data from 70 developing countries (28 of them African countries) over the period 1980-2003 (pooled in two twelve-years periods) provides supportive results. Moreover, the data suggest that terms-of- trade instability affects democracy through income instability. These results are robust to alternative specifications and to the use of different measures of aid intensity and democracy

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    Paper provided by HAL in its series Post-Print with number hal-00331902.

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    Date of creation: 2008
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    Publication status: Published, Economics Bulletin, 2008, 6, 41, 1-16
    Handle: RePEc:hal:journl:hal-00331902

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    1. Paul Collier & Benedikt Goderis, 2007. "Does Aid Mitigate External Shocks?," Economics Series Working Papers WPS/2007-18, University of Oxford, Department of Economics.
    2. Jean-François Brun & Gérard Chambas & Samuel Guerineau, 2011. "Aide et mobilisation fiscale dans les pays en développement," Working Papers halshs-00556804, HAL.
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    13. Rodrik, Dani, 2000. "Institutions For High-Quality Growth: What They Are And How To Acquire Them," CEPR Discussion Papers 2370, C.E.P.R. Discussion Papers.
    14. Goldsmith, Arthur A., 2001. "Foreign Aid and Statehood in Africa," International Organization, Cambridge University Press, vol. 55(01), pages 123-148, December.
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    20. Brautigam, Deborah A & Knack, Stephen, 2004. "Foreign Aid, Institutions, and Governance in Sub-Saharan Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 52(2), pages 255-85, January.
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