The Amplification Effect: Foreign Aid's Impact on Political Institutions

21 Pages Posted: 13 Apr 2013

See all articles by Nabamita Dutta

Nabamita Dutta

University of Wisconsin, La Crosse

Peter T. Leeson

George Mason University - Department of Economics

Claudia R. Williamson

Mississippi State University

Date Written: May 2013

Abstract

How does foreign aid affect recipient countries' political institutions? Two competing hypotheses offer contradictory predictions. The first sees aid, when delivered correctly, as an important means of making dictatorial recipient countries more democratic. The second sees aid as a corrosive force on recipient countries' political institutions that makes them more dictatorial. This paper offers a third hypothesis about how aid affects recipients' political institutions that we call the “amplification effect.” We argue that foreign aid has neither the power to make dictatorships more democratic nor to make democracies more dictatorial. It only amplifies recipients' existing political institutions. We investigate this hypothesis using panel data for 124 countries between 1960 and 2009. Our findings support the amplification effect. Aid strengthens democracy in already democratic countries and dictatorship in already dictatorial regimes.

Suggested Citation

Dutta, Nabamita and Leeson, Peter T. and Williamson, Claudia R., The Amplification Effect: Foreign Aid's Impact on Political Institutions (May 2013). Kyklos, Vol. 66, Issue 2, pp. 208-228, 2013. Available at SSRN: https://ssrn.com/abstract=2250246 or http://dx.doi.org/10.1111/kykl.12018

Nabamita Dutta (Contact Author)

University of Wisconsin, La Crosse ( email )

Dept. of Economics, 1725 State Street
La Crosse, WI 54601
United States
6087855294 (Phone)

Peter T. Leeson

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

HOME PAGE: http://www.peterleeson.com

Claudia R. Williamson

Mississippi State University ( email )

Box 9580
312K McCool Hall
Mississippi State, MS 39762
United States
7242558627 (Phone)

HOME PAGE: http://www.claudiawilliamson.com

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