IDEAS home Printed from https://ideas.repec.org/p/vil/papers/23.html
   My bibliography  Save this paper

Aid and Democracy Redux

Author

Abstract

This paper uses Freedom House ratings to assess the impact of foreign aid on democracy. We employ an interval regression to account for Freedom House's method of rating countries. A cross-sectional analysis examining the long run effect of aid on democracy in 122 countries between 1972 and 2011 finds a significant positive relationship that survives various tests for endogeneity. A short run annual panel analysis of 156 countries between 1985 and 2011 explores whether aid operates through leverage and conditionality. We present evidence that i) donors allocate aid in response to democratization and ii) recipient countries respond to this incentive for democratic reform. Our identification strategy relies on the reduced importance of democratization in the allocation of aid to geopolitically important countries.

Suggested Citation

  • Erasmus Kersting & Christopher Kilby, 2013. "Aid and Democracy Redux," Villanova School of Business Department of Economics and Statistics Working Paper Series 23, Villanova School of Business Department of Economics and Statistics.
  • Handle: RePEc:vil:papers:23
    as

    Download full text from publisher

    File URL: http://repec.library.villanova.edu/workingpapers/VSBEcon23.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. A. Fielding, 1999. "Why use arbitrary points scores?: ordered categories in models of educational progress," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 162(3), pages 303-328.
    2. Alesina, Alberto & Devleeschauwer, Arnaud & Easterly, William & Kurlat, Sergio & Wacziarg, Romain, 2003. "Fractionalization," Journal of Economic Growth, Springer, vol. 8(2), pages 155-194, June.
    3. Greene,William H. & Hensher,David A., 2010. "Modeling Ordered Choices," Cambridge Books, Cambridge University Press, number 9780521194204, April.
    4. Axel Dreher & Peter Nunnenkamp & Rainer Thiele, 2008. "Does Aid for Education Educate Children? Evidence from Panel Data," World Bank Economic Review, World Bank Group, vol. 22(2), pages 291-314, April.
    5. Mark B. Stewart, 1983. "On Least Squares Estimation when the Dependent Variable is Grouped," Review of Economic Studies, Oxford University Press, vol. 50(4), pages 737-753.
    6. David A Armstrong II, 2011. "Stability and change in the Freedom House political rights and civil liberties measures," Journal of Peace Research, Peace Research Institute Oslo, vol. 48(5), pages 653-662, September.
    7. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    8. repec:cup:apsrev:v:53:y:1959:i:01:p:69-105_00 is not listed on IDEAS
    9. Michael A. Clemens & Steven Radelet & Rikhil R. Bhavnani & Samuel Bazzi, 2012. "Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth," Economic Journal, Royal Economic Society, vol. 122(561), pages 590-617, June.
    10. Alesina, Alberto & Dollar, David, 2000. "Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
    11. Simeon Djankov & Jose Montalvo & Marta Reynal-Querol, 2008. "The curse of aid," Journal of Economic Growth, Springer, vol. 13(3), pages 169-194, September.
    12. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    13. Nabamita Dutta & Peter T. Leeson & Claudia R. Williamson, 2013. "The Amplification Effect: Foreign Aid's Impact on Political Institutions," Kyklos, Wiley Blackwell, vol. 66(2), pages 208-228, May.
    14. Dietrich, Simone & Wright, Joseph, 2012. "Foreign Aid and Democratic Development in Africa," WIDER Working Paper Series 020, World Institute for Development Economic Research (UNU-WIDER).
    15. Giulia Bettin & Riccardo Lucchetti, 2012. "Interval regression models with endogenous explanatory variables," Empirical Economics, Springer, vol. 43(2), pages 475-498, October.
    16. Birchler, Kassandra & Michaelowa, Katharina, 2016. "Making aid work for education in developing countries: An analysis of aid effectiveness for primary education coverage and quality," International Journal of Educational Development, Elsevier, vol. 48(C), pages 37-52.
    17. Kalyvitis, Sarantis & Vlachaki, Irene, 2012. "When does more aid imply less democracy? An empirical examination," European Journal of Political Economy, Elsevier, vol. 28(1), pages 132-146.
    18. Kevin Morrison, 2013. "Membership no longer has its privileges: The declining informal influence of Board members on IDA lending," The Review of International Organizations, Springer, vol. 8(2), pages 291-312, June.
    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.
    20. repec:unu:wpaper:wp2012-20 is not listed on IDEAS
    21. Sarantis Kalyvitis & Irene Vlachaki, 2010. "Democratic Aid And The Democratization Of Recipients," Contemporary Economic Policy, Western Economic Association International, vol. 28(2), pages 188-218, April.
    22. Bermeo, Sarah Blodgett, 2011. "Foreign Aid and Regime Change: A Role for Donor Intent," World Development, Elsevier, vol. 39(11), pages 2021-2031.
    23. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    24. Cameron,A. Colin & Trivedi,Pravin K., 2008. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9787111235767.
    25. Minoiu, Camelia & Reddy, Sanjay G., 2010. "Development aid and economic growth: A positive long-run relation," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(1), pages 27-39, February.
    26. Alexander Libman & Anastassia Obydenkova, 2013. "Informal governance and participation in non-democratic international organizations," The Review of International Organizations, Springer, vol. 8(2), pages 221-243, June.
    27. Jac C. Heckelman, 2010. "Aid and Democratization in the Transition Economies," Kyklos, Wiley Blackwell, vol. 63(4), pages 558-579, November.
    28. Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance 0407010, EconWPA.
    29. Axel Dreher & Andreas Fuchs, 2011. "Rogue Aid? The Determinants of China's Aid Allocation," CESifo Working Paper Series 3581, CESifo Group Munich.
    30. World Bank, 2012. "World Development Indicators 2012," World Bank Publications, The World Bank, number 6014, June.
    31. Chesher, Andrew & Irish, Margaret, 1987. "Residual analysis in the grouped and censored normal linear model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 33-61.
    32. Goldsmith, Arthur A., 2001. "Foreign Aid and Statehood in Africa," International Organization, Cambridge University Press, vol. 55(01), pages 123-148, December.
    33. José Cheibub & Jennifer Gandhi & James Vreeland, 2010. "Democracy and dictatorship revisited," Public Choice, Springer, vol. 143(1), pages 67-101, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mantobaye Moundigbaye & William Rea & W. Robert Reed, 2016. "More Evidence On “Which Panel Data Estimator Should I Use?”," Working Papers in Economics 16/18, University of Canterbury, Department of Economics and Finance.
    2. repec:pal:eurjdr:v:29:y:2017:i:2:d:10.1057_ejdr.2016.16 is not listed on IDEAS
    3. repec:eee:epplan:v:68:y:2018:i:c:p:225-232 is not listed on IDEAS
    4. Dreher, Axel & Fuchs, Andreas & Hodler, Roland & Parks, Bradley C. & Raschky, Paul A. & Tierney, Michael J., 2015. "Aid on Demand: African Leaders and the Geography of China's Foreign Assistance," CEPR Discussion Papers 10704, C.E.P.R. Discussion Papers.
    5. Ehizuelen Michael Mitchell Omoruyi, 2016. "The Dragon's Goodwill: Examining China's External Finance and African Leaders' Preferentialism," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(03), pages 1-30, October.
    6. repec:eee:poleco:v:51:y:2018:i:c:p:1-14 is not listed on IDEAS
    7. repec:eee:poleco:v:49:y:2017:i:c:p:164-181 is not listed on IDEAS
    8. Jones, Sam & Tarp, Finn, 2016. "Does foreign aid harm political institutions?," Journal of Development Economics, Elsevier, vol. 118(C), pages 266-281.
    9. Dreher, Axel & Fuchs, Andreas & Parks, Bradley & Strange, Austin M. & Tierney, Michael J., 2016. "Apples and Dragon Fruits: The Determinants of Aid and Other Forms of State Financing from China to Africa," Working Papers 0620, University of Heidelberg, Department of Economics.
    10. Moundigbaye, Mantobaye & Rea, William S. & Reed, W. Robert, 2018. "Which panel data estimator should I use? A corrigendum and extension," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 12, pages 1-31.
    11. repec:elg:eechap:15325_15 is not listed on IDEAS
    12. Rachael Calleja & David Carment & Mark Haichin & Peter Tikuisis, 2017. "Backsliding and reversal: The J-Curve revisited," WIDER Working Paper Series 170, World Institute for Development Economic Research (UNU-WIDER).
    13. Carlo Drago & Roberto Ricciuti, 2018. "An Interval Variables Approach to Address Measurement Uncertainty in Governance Indicators," Working Papers 02/2018, University of Verona, Department of Economics.
    14. repec:spr:revint:v:12:y:2017:i:4:d:10.1007_s11558-016-9250-3 is not listed on IDEAS
    15. Axel Dreher & Valentin F. Lang & Sebastian Ziaja, 2017. "Foreign Aid in Areas of Limited Statehood," CESifo Working Paper Series 6340, CESifo Group Munich.
    16. Askarov, Zohid & Doucouliagos, Hristos, 2015. "Aid and institutions in transition economies," European Journal of Political Economy, Elsevier, vol. 38(C), pages 55-70.
    17. Hagen, Rune Jansen, 2014. "Rents and the Political Economy of Development Aid," Working Papers in Economics 07/14, University of Bergen, Department of Economics.

    More about this item

    Keywords

    Democracy; Freedom House; Foreign Aid; Political Reform;

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vil:papers:23. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher Kilby). General contact details of provider: http://edirc.repec.org/data/edvilus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.