Does Foreign Aid Promote Democracy?

Muhammed Hameed provided valuable research assistance. The editors and several anonymous referees provided helpful comments. The conclusions of this paper are not intended to represent the views of the World Bank, its Executive Directors, or the countries they represent. 1 Aid potentially can contribute to democratization in several ways: (1) through technical assistance focusing on electoral processes, the strengthening of legislatures and judiciaries as checks on executive power, and the promotion of civil society organizations, including a free press; (2) through conditionality; and (3) by improving education and increasing per capita incomes, which research shows are conducive to democratization. This study provides a multivariate analysis of the impact of aid on democratization in a large sample of recipient nations over the 1975-2000 period. Using two different democracy indexes and two different measures of aid intensity, no evidence is found that aid promotes democracy. This result is robust to alternative model specifications and estimation techniques, including the use of exogenous instruments for aid. Results are similar if the analysis is confined to the post-Cold War period (1990-2000), despite the reduced dependence of the U.S. and other donors on pro-Western authoritarian regimes among aid recipient nations