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Breaking the wave of democracy: The effect of foreign aid on the incumbent’s re-election probability

  • Grégoire ROTA-GRAZIOSI

    ()

    (Centre d'Etudes et de Recherches sur le Développement International)

  • Clémence VERGNE

    (Agence Française de Développement)

  • Blanca MORENO DODSON

We investigate whether foreign aid affects the probability of incumbent’s re-election and then the Schumpeterian quality of democracy in developing countries. We present a simple theoretical framework, which captures the competitiveness of elections through the Tullock’s approach based on the Contest Success Function. We obtain an ambiguous theoretical effect of foreign aid on the incumbent probability to be reelected: Foreign aid increases the prize of the electoral contest stimulating the challenger to increase his campaign effort; But, the incumbent may divert part of the aid, improving his advantage and reducing political competition. We investigate empirically this effect using panel data from 60 aid-recipient countries between 1980 and 2005. Our analysis shows that foreign aid increases the incumbent’s re-election probabilities. However, this effect depends on recipients’ democratic level and on the nature of foreign aid, consistently with our theoretical framework. While financial aid increases the probability of incumbent’s re-election, political aid, especially through assistances in developing competitive electoral systems, reduces this probability.

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Paper provided by CERDI in its series Working Papers with number 201231.

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Length: 40
Date of creation: 2012
Date of revision:
Handle: RePEc:cdi:wpaper:1379
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  1. Svensson, Jakob, 2000. "Foreign aid and rent-seeking," Journal of International Economics, Elsevier, vol. 51(2), pages 437-461, August.
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  17. 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.
  18. Dunning, Thad, 2004. "Conditioning the Effects of Aid: Cold War Politics, Donor Credibility, and Democracy in Africa," International Organization, Cambridge University Press, vol. 58(02), pages 409-423, April.
  19. Morrison, Kevin M., 2009. "Oil, Nontax Revenue, and the Redistributional Foundations of Regime Stability," International Organization, Cambridge University Press, vol. 63(01), pages 107-138, January.
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