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Foreign aid and domestic politics : implications for aid selectivity

Hagen, Rune Jansen
Working paper
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URI
http://hdl.handle.net/11250/163278
Date
2004-06
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  • Discussion papers (SAM) [607]
Abstract
The links between foreign aid and policies in developing countries have been at the

forefront of the policy debate for decades. An emerging consensus touts aid selectivity

as the solution to the failures of conditionality. In recent years, many recipients have

implemented political reforms resulting in more democratic regimes. I show that donor

influence depends on the aid budget being large enough relative to the recipient. I also

demonstrate that if aid influences policies, the political equilibrium in democratic recipient

countries is likely to change to the disadvantage of the political alternative favoured by the

donor. This implies that aid selectivity should be applied cautiously.
Publisher
Norwegian School of Economics and Business Administration. Department of Economics
Series
Discussion paper
2004:12

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