Does Foreign Aid Support Autocrats, Democrats, or Both?
Daniel Yuichi Kono, Gabriella R. Montinola
Does foreign aid prop up recipient governments? Although many people argue that it does, there is little systematic evidence to support this claim. We argue that aid's effects on government survival depend on both the recipient's regime type and the analyst's time horizons. In the long run, continued aid helps autocrats more than democrats because the former can stockpile this aid for use against future negative shocks. However, because large stocks of aid reduce the marginal impact of current aid, current aid helps democrats more than autocrats. We test and find support for our argument with a survival analysis of 621 leaders in 123 countries from 1960 to 1999. Our results imply that donors should make both the nature of aid and the use of aid conditionality contingent on the domestic regime type of aid recipients.