Aid’s Impact on Democracy

This paper provides new evidence on the effects of aid on democracy. The analysis builds from considerations of the ways in which aid may impact democracy and democratization processes directly, either through targeted interventions at institutions and agents that influence democratic transitions or via support for the structural conditions that indirectly facilitate democracy and democratic transition. We employ a battery of maximum likelihood estimation and structural equation modelling (ML-SEM) methods, instrumental variable estimators and fixed effects models to explore variation across different aid types and political regimes among 148 low- and middle-income countries. Overall, we find that democracy aid has a small but positive impact on democracy, although the effects are larger when aid targets the building blocks of democracy via the promotion of the civil society, free media, and human rights. Democracy aid appears to be more effective at supporting ongoing democratization than at halting ongoing democratic backsliding. These results are robust to multiple specifications.