Democracy and Aid Donorship

Almost half of the world’s states provide bilateral development assistance. While previous research takes the set of donor countries as exogenous, this article is the first to explore the determinants of aid donorship. We hypothesize that democratic institutions reduce the likelihood that poor countries will become aid donors. By contrast, the leadership of poor authoritarian regimes face fewer constraints that would hinder these governments from reaping the benefits of a development aid program despite popular opposition. To test our expectations, we build a new global dataset on aid donorship since 1945 and apply an instrumental-variables strategy that exploits exogenous variation in regional waves of democratization. Our results confirm that the likelihood of a democratic country initiating a development aid program is more dependent upon per-capita income in democratic countries than in authoritarian countries. Overall, democracies are—if anything—less rather than more likely to engage in aid giving.

Funding: The authors are grateful for generous support from the German Research Foundation (DFG) in the framework of the project “The Economics of Emerging Donors in Development Cooperation” at Heidelberg University (DR640/5-1 and FU 997/1-1).