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When Does More Aid Imply Less Democracy? An Empirical ExaminationSarantis C. KalyvitisAthens University of Economics and Business - Department of International and European Economic Studies Irene VlachakiAthens University of Economics and Business - Department of International and European Economic Studies January 2011 Abstract: Foreign aid flows have increased considerably during the last decades targeting, apart from the economic development of recipient countries, several goals related to their democratization process. In this paper we investigate whether aggregate aid has a differential impact on the future political regime of recipient countries. To this end, we use annual data on Net Official Development Assistance covering 64 aid-recipients over the period 1967-1999. We find that aid flows have an adverse impact on the likelihood of observing a democratic regime in the recipient. This effect is particularly strong in countries with bad economic and social conditions, but it is nearly zero in good environments. In addition, the negative effect of aid is moderated when aid flows are preceded by economic liberalization.
Number of Pages in PDF File: 36 Keywords: democratization, foreign aid, binary model, endogeneity JEL Classification: D70, F35, C25 working papers seriesDate posted: July 23, 2007 ; Last revised: January 6, 2011Suggested CitationContact Information
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