Reaping the rewards of democracy : a mixed-methods study of donor reaction to democratization (or lack thereof) in aid recipient countries

The study examines how foreign aid donors react to changes in levels of democracy in recipient countries. After observation a variation in behavior among developed countries, the thesis explains such patterns through a twofold theory. We theorize that the major donors such as the UK, US, the Nordic countries, Germany, Japan and France diverge in their reaction to democracy because of two key factors: variations in their respective political economies and degree of foreign aid independence from foreign policy. The political economy analysis shows that aid priorities are part structurally determined: donors with liberal market-economies will not tolerate bad governance in aid recipients and will look for the more efficient recipients to provide aid; however, donors with coordinated market-economies may tolerate governance weakness in recipient countries to help with state-building. Second, a high degree of foreign aid independence from larger foreign policy makes it more likely that foreign aid is disbursed in pursuit of good governance outcomes in recipient countries rather than to fulfill the strategic priorities of donors. Donors with liberal market-economies who have relatively independent foreign aid agencies like the US, UK and the Nordics are more reactive to democratization (or lack thereof) in recipient countries. Countries like France and Japan that are coordinated market-economies and do not have a fully independent aid disbursing agency do not react to democratization. Germany that is a coordinated market-economy but has an independent foreign aid agency reacts moderately to changes in democracy among recipient countries. We theorize that smaller regional donors purse strategic interests and thus provide aid as a “reward” for democracy only when it is convenient. We utilize a Tunisian as a case study to show the differences among donor disbursement before and after its democratization in 2011. We bolster that case study through a regression analysis. The case study and the regression analysis support our theoretical arguments.Arts, Faculty ofPolitical Science, Department ofGraduat