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Does Foreign Aid Promote Democracy?

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  • Knack, Stephen

Abstract

Aid potentially can contribute to democratization in several ways: (1) through technical assistance focusing on electoral processes, the strengthening of legislatures and judiciaries as checks on executive power, and the promotion of civil society organizations, including a free press; (2) through conditionality; and (3) by improving education and increasing per capita incomes, which research shows are conducive to democratization. This study provides a multivariate analysis of the impact of aid on democratization in a large sample of recipient nations over the 1975-2000 period. Using two different democracy indexes and two different measures of aid intensity, no evidence is found that aid promotes democracy. This result is robust to alternative model specifications and estimation techniques, including the use of exogenous instruments for aid. Results are similar if the analysis is confined to the post-Cold War period (1990-2000), despite the reduced dependence of the U.S. and other donors on pro-Western authoritarian regimes among aid recipient nations.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24855.

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Date of creation: 01 Jul 2003
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Handle: RePEc:pra:mprapa:24855

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Keywords: aid; democracy;

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References

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  1. J. Svensson, 1999. "Aid, Growth and Democracy," Economics and Politics, Wiley Blackwell, vol. 11(3), pages 275-297, November.
  2. Clague, Christopher & Gleason, Suzanne & Knack, Stephen, 2001. "Determinants of lasting democracy in poor countries," MPRA Paper 28048, University Library of Munich, Germany.
  3. Stephen Knack, 2001. "Aid Dependence and the Quality of Governance: Cross-Country Empirical Tests," Southern Economic Journal, Southern Economic Association, vol. 68(2), pages 310-329, October.
  4. Svensson, Jakob, 1998. "Foreign aid and rent-seeking," Policy Research Working Paper Series 1880, The World Bank.
  5. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  6. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank.
  7. Gary Clyde Hufbauer & Jeffrey J. Schott & Kimberly Ann Elliott, 1990. "Economic Sanctions Reconsidered: 2nd Edition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 82.
  8. Isham, Jonathan & Kaufmann, Daniel & Pritchett, Lant H, 1997. "Civil Liberties, Democracy, and the Performance of Government Projects," World Bank Economic Review, World Bank Group, vol. 11(2), pages 219-42, May.
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Cited by:
  1. Kevin Morrison, 2007. "Natural resources, aid, and democratization: A best-case scenario," Public Choice, Springer, vol. 131(3), pages 365-386, June.
  2. Alberto Chong & Mark Gradstein & Cecilia Calderon, 2009. "Can foreign aid reduce income inequality and poverty?," Public Choice, Springer, vol. 140(1), pages 59-84, July.

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