The Uneven Democratization Premium Why Some Countries Receive More Foreign Aid Than Others

Why do some democratizing countries receive substantial increases in foreign aid while others receive little or no additional aid? We show that the aid response to democratization is highly heterogeneous. Using a comprehensive bilateral donor–recipient panel combining multiple international aid datasets with democratization episodes identified in V-Dem’s Episodes of Regime Transformation (ERT) dataset, we find that aid increases are concentrated in episodes associated with major geopolitical realignment and among donors with weaker pre-existing aid relationships. These findings provide the strongest support for a strategic interpretation of the democratization premium. They suggest that donors reward democratization primarily to support particular political transitions in specific geopolitical contexts, rather than because they intrinsically value democracy or expect institutional improvements to enhance aid effectiveness. We further show that democratization in one country does not crowd out aid to others, contributes to donor proliferation by increasing the number of active donors, and elicits weaker aid responses in poorer countries, particularly for basic-needs assistance.