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On the potential of foreign aid to protect democracy against instability from trade

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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

    In this paper, we examine the effects of a major source of instability, namely terms of trade instability on the quality of democracy, and we investigate whether foreign aid can dampen them. 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 democracy. An empirical investigation with data from 71 developing countries over the period 1980-2003 provides supportive results. Moreover, the data suggest that terms of trade instability affects democracy through income instability.

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    Bibliographic Info

    Paper provided by HAL in its series Working Papers with number halshs-00556697.

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    Date of creation: 17 Jan 2011
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    Handle: RePEc:hal:wpaper:halshs-00556697

    Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00556697/en/
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    Keywords: democracy; foreign aid; terms of trade instability;

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