When Does More Aid Imply Less Democracy? An Empirical Examination

36 Pages Posted: 23 Jul 2007 Last revised: 6 Jan 2011

See all articles by Sarantis C. Kalyvitis

Sarantis C. Kalyvitis

Athens University of Economics and Business - Department of International and European Economic Studies

Irene Vlachaki

Athens University of Economics and Business - Department of International and European Economic Studies

Date Written: 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.

Keywords: democratization, foreign aid, binary model, endogeneity

JEL Classification: D70, F35, C25

Suggested Citation

Kalyvitis, Sarantis C. and Vlachaki, Irene, When Does More Aid Imply Less Democracy? An Empirical Examination (January 2011). Available at SSRN: https://ssrn.com/abstract=1002433 or http://dx.doi.org/10.2139/ssrn.1002433

Sarantis C. Kalyvitis

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

Patission Str 76
GR-10434 Athens
Greece

Irene Vlachaki (Contact Author)

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

76 Patission Street
Athens, 104 34
Greece

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