Can Foreign Aid Promote Political and Economic Freedom?

September, 2019

Political and economic freedom are seen as values in themselves, are associated with increases in quality of life across many dimensions, and are often espoused by donors as a goal for foreign aid.  An extensive literature exists examining foreign aid's effect on institutional quality; however, robust evidence regarding these associations are mixed.  Read more of this work in Lessons on Foreign Aid and Economic Development.

Aid Allocation and Outcomes

September, 2019

And extensive literature has emerged in both economics and political science that investigates political motivations behind aid allocation to recipient nations.  A separate but related strand of literature talks about the impact of such aid allocation resulting out of political motivations on different development outcomes including economic growth.  Read more of this work in Lessons on Foreign Aid and Economic Development.

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

May 1, 2013

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.