Foreign Aid DEMOCRACY And Helen Brosnan and Rui Hao Puah ECONOMIC DEVELOPMENT AND INTERNATIONAL POLITICS INAF 100-14 Question HYPOTHESIS Methodology Analysis CONCLUSION

DOES AID HELP OR HURT DEMOCRACY? Aid reduces the probability of regime transition. Aid in general has a negative effect on democracy Positive effect is limited to political aid and conditionality Local conditions determine the effectiveness of aid for democracy Question HYPOTHESIS Methodology Analysis CONCLUSION

AID Increases regime survival longevity. Hypothesis -More aid increase longevity of the current regime, regardless regime type. -More aid, unlikely to see regime transition -Benefits of aid are few and far - Question HYPOTHESIS Methodology Analysis CONCLUSION

Operationalizing DEPENDENT VARIABLES Regime survival -use Przeworski’s (2000) DD definition Regime longevity -use TENSYS (DPI 2010) Survival of democracy in Yt is denoted by the continuation of democracy or the lack of emergence of dictatorship in Yt+1. Survival of dictatorship in Yt is denoted by the continuation of dictatorship or the lack of emergence of dictatorship in Yt+1. We operationalize regime survival using Przeworski’s (2000) dichotomous (abbreviated ‘REGD’) variable coded 1 for democracy and 0 for dictatorship. We introduce a lag variable regd1 to analyse regime survival For a dictatorship, TENSYS measures executive’s years in office (YRSOFFC). For a democracy, TENSYS measures the number of years it has existed as a democracy. TENSYS uses a different citeria to code DD

Foreign aid Net ODA given by DAC and non-DAC donors, received by 144 countries, from 1975-2004 DAC countries are dropped Direct measure -log(net ODA) Indirect measures -Net ODA as a percentage of GNI -Net ODA as a percentage of central government expense -Log(Net ODA) / Log(population). Indirect measures of foreign aid provide an indication of aid intensity (Knack, 2000) relative to size of economy, size of government spending and population. Question HYPOTHESIS Methodology Analysis CONCLUSION

Controlling for democracy lGDPpc, PPP at Constant Int Dollars  Share of surrounding democracies Adult Literacy Rate (>= age 15) No. of previous transitions btw dict/demo OPEC or not former military officer executive leader   Question HYPOTHESIS Methodology Analysis CONCLUSION

Empirical strategy Aid allocation has selection bias Log(Net ODA) / Log(population) accounts for population, gdppc is controlled for Heterogeneity of donor interests Allows for ‘cancelling out’ effect Question HYPOTHESIS Methodology Analysis CONCLUSION

Data analysis Mean and median netoda%ofgni Mean and median tensys dictatorships (8.85%, 5.04%) democracies (5.91%, 2.33%) Mean and median tensys dictatorships (10.65, 8) democracies (9.62, 6) Dictatorships last longer and receive higher netoda%ofgni than democracies We construct an ordinary least squares regression model based on a simple dependent ordinal variable (EIEC+LIEC) regressed against net ODA as a % of GNI and 5 other control variables- log per capita GDP, number of previous regime transitions, former military chief executive, share of adult democracies and literary rate of population 15 years and above. Question HYPOTHESIS Methodology Analysis CONCLUSION

CORRELATION OR CAUSATION?

Results

Results

Conclusion Foreign aid does not have an effect on regime survival Foreign aid has an effect on regime longevity. The effect is greater for dictatorships than democracies. Our above results are robust to 4 measures of foreign aid and 2 definitions of democracy (Przeworski’s DD and DPI’s EIEC) Foreign aid is not significant in regime transitions, for both democracy and dictatorship Foreign aid has an equal Question HYPOTHESIS Methodology Analysis CONCLUSION

Limitations & future research Tensys ~ DD. Controls assumed to be the same. Insufficient controls for foreign aid Omitted variable bias in controlling for democracy Question HYPOTHESIS Methodology Analysis CONCLUSION