The growth impact of foreign aid under alternative political regimes

Abstract

Inspired by a new stream of research that examines the relationship between foreign aid, economic growth and democracy, this study attempts to investigate whether the growth impact of aid is conditional on the political regime of the recipient. We have used cross-country data for 92 developing countries for a twenty nine year time span ranging from 1980 – 2008. The results of this analysis indicated that democracy seems to be positively and significantly related to growth. Nevertheless, we found no evidence that aid works better in more democratic environments. On the contrary, we found little evidence that in some cases, aid is more effective in promoting growth under non-democratic recipients.