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Does Foreign Aid Promote Democracy?

Author

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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.

Suggested Citation

  • Knack, Stephen, 2003. "Does Foreign Aid Promote Democracy?," MPRA Paper 24855, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24855
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    File URL: https://mpra.ub.uni-muenchen.de/24855/1/MPRA_paper_24855.pdf
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    References listed on IDEAS

    as
    1. Svensson, Jakob, 2000. "Foreign aid and rent-seeking," Journal of International Economics, Elsevier, vol. 51(2), pages 437-461, August.
    2. J. Svensson, 1999. "Aid, Growth and Democracy," Economics and Politics, Wiley Blackwell, vol. 11(3), pages 275-297, November.
    3. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    4. 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.
    5. repec:cup:apsrev:v:53:y:1959:i:01:p:69-105_00 is not listed on IDEAS
    6. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
    7. Gary Clyde Hufbauer & Jeffrey J. Schott & Kimberly Ann Elliott, 2009. "Economic Sanctions Reconsidered, 3rd Edition (paper)," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 4129.
    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 219-242, May.
    9. 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, January.
    10. repec:cup:apsrev:v:88:y:1994:i:04:p:903-910_09 is not listed on IDEAS
    11. Clague, Christopher & Gleason, Suzanne & Knack, Stephen, 2001. "Determinants of lasting democracy in poor countries," MPRA Paper 28048, University Library of Munich, Germany.
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    Citations

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    Cited by:

    1. 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.
    2. Kevin Morrison, 2007. "Natural resources, aid, and democratization: A best-case scenario," Public Choice, Springer, vol. 131(3), pages 365-386, June.

    More about this item

    Keywords

    aid; democracy;

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid

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