Aid and democracy promotion in Asia

Abstract

Can foreign aid be used to promote democracy in Asia? Because liberalization is costly for the autocratic recipients, they can be expected to resist donor pressure to reform politically. The recipients who have the strategic and commercial attributes that donors value should have an easier time getting aid offers and hence leverage against donors who seek liberalization. By contrast, the recipients who lack such attributes have less leverage. This group of “secondary” recipients can be nudged towards political liberalization. I test this argument using foreign aid from AidData and regime-type information from Polity IV. The evidence bares out the argument even after correcting for the threat of reverse causality. I conclude with policy prescriptions for effective aid allocation.

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