The Mechanism of Foreign Aid for Democratization

Cross-National Analysis 1990-2010
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Abstract

Previous studies on whether foreign aid promotes democracy show contradictory results and rarely delve into the possible mechanisms behind democratization. I argue that economic elites who benefit from foreign aid and who seek to secure property rights are a driving force for democratization. Foreign aid given to non-democratic countries may worsen economic inequality, because those countries tend to have higher levels of corruption, and a part of the foreign aid is used to enrich political and economic elites. In countries with lower levels of democracy, the poor quality of property rights protection threatens the economic elites with expropriation by the government. Thus, in non-democratic countries, as economic elites get richer and economic inequality worsens, economic elites apply pressure on the government to democratize. I analyze cross-national data with hierarchical models, where countries are split into democracies and non-democracies to reflect the expected differences in the effect of foreign aid. Models estimated by Bayesian inference demonstrate that (1) foreign aid is positively associated with inequality across regimes, (2) inequality is positively related to the level of democracy in non-democratic countries, and (3) inequality is a stronger driving force for democratization in non-democratic countries.

Presentation

• Midwest Political Science Association, Annual Meeting
  • Chicago, IL, April 2016
  • Poster

Replication Code

You can find them on GitHub.