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Foreign Aid and Repression

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Lessons on Foreign Aid and Economic Development

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Abstract

Despite the democracy-enhancing intentions of most donors, foreign aid can often offer opportunities for governments to politically repress their populations. This chapter argues and presents evidence that aid from the world’s largest bilateral donor—the United States—harms political rights in recipient countries. US aid does so by weakening government accountability via the taxation channel. US aid lowers a government’s incentive to collect taxes. And this reduction in tax effort is negatively associated with political rights. These findings run counter to the stated intentions of the US government—and other bilateral donors—to foster political liberalization abroad via bilateral economic assistance.

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Notes

  1. 1.

    See http://www.state.gov/j/drl/hr/index.htm (Accessed: April 2016).

  2. 2.

    An instrumental variable (Z) can help mitigate concerns with endogeneity bias, such as reverse causality. For instance, if a country’s political rights (Y) influence a country’s receipts of foreign aid (X) then estimating the causal effect of X on Y will be biased. A valid instrument Z can help overcome this issue if Z is a strong predictor of variation in X but is uncorrelated with the main outcome variable, Y.

  3. 3.

    This section presents an abridged discussion on the discussion through which aid can affect political liberalization. For more detailed discussions, see Finkel et al. (2007), Wright (2009), and Ahmed (2016).

  4. 4.

    In contrast, House members from more right-leaning districts favor military aid than do members from less right-leaning district.

  5. 5.

    Pi is based on the proportion of years between 1972 and 2008 a country receives any US aid.

  6. 6.

    Hoeffler and Outram (2011) discuss the “need” and “merit” based determinants of foreign aid.

  7. 7.

    In general, more frequent US aid recipients (who also receive larger amounts of assistance) tend to be democratic. On average, Pi is negatively correlated with POLITICAL RIGHTS (see Table 2, column 2).

  8. 8.

    These results are available in Ahmed (2016), Table 2 columns 6–10.

  9. 9.

    These robustness checks are discussed and presented in Ahmed (2016) and its accompanying appendices.

  10. 10.

    Ahmed (2016) shows that US aid does not foster repression via the rent-seeking mechanism.

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Author information

Authors and Affiliations

  1. Princeton University, Princeton, NJ, USA

    Faisal Z. Ahmed

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  1. Faisal Z. Ahmed
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Correspondence to Faisal Z. Ahmed .

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Editors and Affiliations

  1. University of Wisconsin-La Crosse, La Crosse, WI, USA

    Nabamita Dutta

  2. Mississippi State University, Mississippi, MS, USA

    Claudia R. Williamson

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Ahmed, F.Z. (2019). Foreign Aid and Repression. In: Dutta, N., Williamson, C.R. (eds) Lessons on Foreign Aid and Economic Development. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-22121-8_9

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  • DOI: https://doi.org/10.1007/978-3-030-22121-8_9

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  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-030-22120-1

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