This paper investigates the effects of the fragmentation of democracy aid on democratization. Aid fragmentation, i.e. the provision of aid by a large number of donors with similar market shares, has been shown to impact negatively on governance in the recipient country by increasing transaction costs, encouraging corruption and aggravating the competition for qualified personnel. But aid fragmentation also makes coordination among donors more difficult, frustrating attempts to implement political conditionalities. Thus, fragmented overall aid is expected to decrease coercive leverage for inducing political reform in recipient countries. I argue, however, that the fragmentation of democracy aid has the opposing effect. Democracy aid is geared towards multiple actors, reducing transaction costs. At the same time, coherent democracy aid would offer only a limited set of options towards solving the complex process of creating viable political institutions. Since a beneficial institutional layout is difficult to define ex ante and from the outside, coordinated donor engagement enforced by conditionalities is likely to lead to the imposition of institutional blue-prints that do not reflect the needs of the people. In a more fragmented aid setting, multiple recipient actors can choose from various types of assistance offered, leading to institutional arrangements that better coincide with local needs. I expect this effect to be more pronounced in less autocratic recipient countries, because developed party systems and an organized civil society that is able to benefit from a diverse donor environment are more likely to exist here. These propositions are tested with data from 1990 to 2009. I apply an error correction model to analyze the temporal dynamics and Granger causality tests. The empirical evidence suggests that fragmented democracy aid has a positive impact on democracy. The causal mechanism is traced with an exemplary country case.
