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Does foreign aid harm political institutions?

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  • Jones, Sam
  • Tarp, Finn

Abstract

The notion that foreign aid harms the institutions of recipient governments remains prevalent. We combine new disaggregated aid data and various metrics of political institutions to re-examine this relationship. Long run cross-section and alternative dynamic panel estimators show a small positive net effect of total aid on political institutions. Distinguishing between types of aid according to their frequency domain and stated objectives, we find that this aggregate net effect is driven primarily by the positive contribution of more stable inflows of ‘governance aid’. We conclude that the data do not support the view that aid has had a systematic negative effect on political institutions.

Suggested Citation

  • Jones, Sam & Tarp, Finn, 2016. "Does foreign aid harm political institutions?," Journal of Development Economics, Elsevier, vol. 118(C), pages 266-281.
  • Handle: RePEc:eee:deveco:v:118:y:2016:i:c:p:266-281
    DOI: 10.1016/j.jdeveco.2015.09.004
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    Cited by:

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    2. repec:eee:epplan:v:68:y:2018:i:c:p:225-232 is not listed on IDEAS
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    4. repec:bla:obuest:v:79:y:2017:i:4:p:463-494 is not listed on IDEAS
    5. Tony Addison & Ville Pikkarainen & Risto Rönkkö & Finn Tarp, 2017. "Development and poverty in sub-Saharan Africa," WIDER Working Paper Series 169, World Institute for Development Economic Research (UNU-WIDER).
    6. Rodriguez Acosta, Mauricio, 2016. "Essays in political economy and resource economic : A macroeconomic approach," Other publications TiSEM 1e39ef1b-43a2-4f95-892c-6, Tilburg University, School of Economics and Management.
    7. repec:eee:poleco:v:49:y:2017:i:c:p:164-181 is not listed on IDEAS
    8. Maurice J.G. Bun & Martin A. Carree & Artūras Juodis, 2017. "On Maximum Likelihood Estimation of Dynamic Panel Data Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(4), pages 463-494, August.
    9. Bernhard Reinsberg & Alexander Kentikelenis & Thomas Stubbs & Lawrence King & Centre for Business Research, 2018. "The World System & the Hollowing-out of State Capacity: How Structural Adjustment Programs Impact Bureaucratic Quality in Developing Countries," Working Papers wp503, Centre for Business Research, University of Cambridge.
    10. Hassan, Sherif, 2016. "Seventy Years of Official Development Assistance: Reflections on the Working Age Population," MPRA Paper 74835, University Library of Munich, Germany.

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