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When does more aid imply less democracy? An empirical examination

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  • Irene Vlachaki

    () (European Commission, Brussels, Belgium)

  • Sarantis Kalyvitis

    () (DIEES, AUEB)

Abstract

Foreign aid flows have increased considerably during the last decades, targeting, apart from development objectives, goals related to democracy. In this paper we investigate whether aid has affected the political regime of recipient countries. To this end, we use annual data on Net Official Development Assistance covering 64 aid-recipients. Because of data limitations, we cover the period 1967-2002. We find that aid flows decreased the likelihood of observing a democratic regime in a recipient country. This effect is sensitive to economic and social conditions. The negative relation between aid and democracy is moderated when aid flows are preceded by economic liberalization. Aid from the U.S. has a non-significant effect on the political regime of recipients.

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  • Irene Vlachaki & Sarantis Kalyvitis, 2011. "When does more aid imply less democracy? An empirical examination," DEOS Working Papers 1125, Athens University of Economics and Business.
  • Handle: RePEc:aue:wpaper:1125
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    Cited by:

    1. Kersting, Erasmus & Kilby, Christopher, 2014. "Aid and democracy redux," European Economic Review, Elsevier, vol. 67(C), pages 125-143.
    2. Blanca Moreno Dodson & Grégoire Rota-Graziosi & Clémence Vergne, 2012. "Breaking the wave of democracy: The effect of foreign aid on the incumbent's re-election probability," Working Papers halshs-00722375, HAL.
    3. Niklas Potrafke, 2013. "Democracy and countries with Muslim majorities: a reply and update," Public Choice, Springer, vol. 154(3), pages 323-332, March.
    4. Balázs Szent-Iványi, 2015. "Are Democratising Countries Rewarded with Higher Levels of Foreign Aid?," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 65(4), pages 593-615, December.
    5. Adam, Antonis & Tsarsitalidou, Sofia, 2017. "Do Democracies Have Higher Current Account Deficits?," MPRA Paper 76400, University Library of Munich, Germany.
    6. Rode, Martin & Gwartney, James D., 2012. "Does democratization facilitate economic liberalization?," European Journal of Political Economy, Elsevier, vol. 28(4), pages 607-619.
    7. Audrey Menard, 2012. "Why foreign aid does (not) improve democracy?," Working Papers of BETA 2012-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    8. Oechslin, Manuel, 2014. "Targeting autocrats: Economic sanctions and regime change," European Journal of Political Economy, Elsevier, vol. 36(C), pages 24-40.
    9. Aidt, Toke & Albornoz, Facundo & Gassebner, Martin, 2010. "The Golden Halo and Political Transitions," Proceedings of the German Development Economics Conference, Hannover 2010 48, Verein für Socialpolitik, Research Committee Development Economics.
    10. Zohid Askarov & Hristos Doucouliagos, 2013. "Does aid improve democracy and governance? A meta-regression analysis," Public Choice, Springer, vol. 157(3), pages 601-628, December.
    11. Dreher, Axel & Jensen, Nathan M., 2013. "Country or leader? Political change and UN General Assembly voting," European Journal of Political Economy, Elsevier, vol. 29(C), pages 183-196.
    12. Niklas Potrafke, 2016. "Policies against human trafficking: the role of religion and political institutions," Economics of Governance, Springer, vol. 17(4), pages 353-386, November.
    13. Young, Andrew T. & Sheehan, Kathleen M., 2014. "Foreign aid, institutional quality, and growth," European Journal of Political Economy, Elsevier, vol. 36(C), pages 195-208.
    14. Askarov, Zohid & Doucouliagos, Hristos, 2015. "Aid and institutions in transition economies," European Journal of Political Economy, Elsevier, vol. 38(C), pages 55-70.
    15. Gouda, Moamen & Potrafke, Niklas, 2016. "Gender equality in Muslim-majority countries," Economic Systems, Elsevier, vol. 40(4), pages 683-698.
    16. John Anyanwu & Andrew E. O. Erhijakpor, 2013. "Working Paper 184 - Does Oil Wealth Affect Democracy in Africa?," Working Paper Series 988, African Development Bank.
    17. Reinsberg, Bernhard, 2015. "Foreign Aid Responses to Political Liberalization," World Development, Elsevier, vol. 75(C), pages 46-61.
    18. Broich, Tobias & Szirmai, Adam & Thomsson, Kaj, 2015. "Precolonial centralisation, foreign aid and modern state capacity in Africa," MERIT Working Papers 025, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    19. Islam, Muhammed N., 2015. "Economic growth, repression, and state expenditure in non-democratic regimes," European Journal of Political Economy, Elsevier, vol. 37(C), pages 68-85.
    20. repec:eee:ecanpo:v:54:y:2017:i:c:p:105-111 is not listed on IDEAS
    21. repec:eee:poleco:v:49:y:2017:i:c:p:164-181 is not listed on IDEAS

    More about this item

    Keywords

    democratization; foreign aid; binary model; endogeneity;

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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