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Why foreign aid does (not) improve democracy?

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  • Audrey Menard

Abstract

Foreign aid has become closely connected to the development of democracy since the nineties. This paper analyses the democracy effects of aid accounting for this change in donors’ criteria. This approach contributes to the literature by analysing how the kind of donor allocating aid flows influences the effect of aid on democ- racy. I estimate a dynamic panel data model using data from 52 African countries between 1997 and 2008. I find that aid favours democracy. However when consider- ing the kind of donor, I observe that while bilateral aid does not foster democracy, multilateral aid favours democracy. Robustness tests confirm these findings.

Suggested Citation

  • Audrey Menard, 2012. "Why foreign aid does (not) improve democracy?," Working Papers of BETA 2012-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    • Handle: RePEc:ulp:sbbeta:2012-19
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    References listed on IDEAS

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    Cited by:

    1. John Anyanwu & Andrew E. O. Erhijakpor, 2013. "Working Paper 184 - Does Oil Wealth Affect Democracy in Africa?," Working Paper Series 988, African Development Bank.

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    More about this item

    Keywords

    Democracy; Bilateral aid; Panel data; Endogeneity.;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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