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Breaking the wave of democracy: The effect of foreign aid on the incumbent's re-election probability

Author

Listed:
  • Blanca Moreno Dodson

    (WB - World Bank - World Bank)

  • Grégoire Rota-Graziosi

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

  • Clémence Vergne

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

Abstract

We investigate whether foreign aid affects the probability of incumbent's re-election and then the Schumpeterian quality of democracy in developing countries. We present a simple theoretical framework, which captures the competitiveness of elections through the Tullock's approach based on the Contest Success Function. We obtain an ambiguous theoretical effect of foreign aid on the incumbent probability to be reelected: Foreign aid increases the prize of the electoral contest stimulating the challenger to increase his campaign effort; But, the incumbent may divert part of the aid, improving his advantage and reducing political competition. We investigate empirically this effect using panel data from 60 aid-recipient countries between 1980 and 2005. Our analysis shows that foreign aid increases the incumbent's re-election probabilities. However, this effect depends on recipients' democratic level and on the nature of foreign aid, consistently with our theoretical framework. While financial aid increases the probability of incumbent's re-election, political aid, especially through assistances in developing competitive electoral systems, reduces this probability.

Suggested Citation

  • Blanca Moreno Dodson & Grégoire Rota-Graziosi & Clémence Vergne, 2012. "Breaking the wave of democracy: The effect of foreign aid on the incumbent's re-election probability," CERDI Working papers halshs-00722375, HAL.
    • Handle: RePEc:hal:cdiwps:halshs-00722375
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00722375
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