One privilege of advising graduate students is that they keep you up on emerging literatures. A recent PhD from UCSD— Ryan Jablonski, currently at the LSE in London—provided a very nice summary of the literature on aid and the survival of autocratic leaders in his thesis; we borrow from and expand on it here.
A parsimonious statement of the theory is outlined in Bruce Bueno de Mesquita and Alastair Smith's terrific Dictator's Handbook. They model aid—as most of this literature does—as a strategic interaction: donors are interested in affecting some policy concession in the recipient state; leaders are interested above all in maximizing political survival. The policy changes demanded by donors impose some costs, at least in the short-run; as a result, aid will be most beneficial to leaders that have narrow bases of support that can be compensated with targeted transfers. As a result, aid has a more marked (positive) effect on political survival in autocracies than in democracies.
Unfortunately, the empirical literature appears to confirm the finding that aid effectively strengthens dictatorships. Knack (2004) was the first out of the box in this vein, noting that aid had no effect on democracy one way or the other; in context, this was clearly a skeptical finding. Djankov et. al. (2008) argued that aid actually reduced democracy.
Refinements by political scientists followed. Licht (2010) compares the effect of aid in states with larger and smaller winning coalition; the former are mostly democratic, the latter more likely to be autocratic. She finds that aid, on average, increases the survival probability of autocratic leaders and even decreases the survival probability of most democratic leaders. Kono and Montinola (2009) come to similar conclusions with respect to autocrats, but not democracies. In an earlier Academic Sources post we noted the cognate findings of Ahmed (2012), who argues that foreign aid provides autocratic leaders with resources to use in the distribution of patronage, and uses a novel instrumentation strategy to show that aid decreases the probability of regime collapse or turnover and decreases spending on welfare goods.
Of course, donors are not (entirely) stupid, and are thus aware of these problems. There is a substantial literature now arguing that aid is more effective when it is delivered to countries with good policies, or democratic institutions, or when donors engage in efforts to foil aid capture (examples include now classic pieces in the aid literature by Svensson 1999 and Burnside and Dollar 2000 as well as new entries by Wright and Winters 2010 and Winters 2014). But a new literature also has focused in on aid strategies. Winters (2014) for example shows that when donors face the risk of corruption, they target aid more precisely; moreover, such targeting efforts reduce the overall level of corruption. Dietrich shows that governments delegate to non-governmental organizations for similar reasons. Jablonski’s as yet unpublished work with Clark Gibson and Barak Hoffman shows that donors invest in technical assistance projects in order to prevent the use of aid for patronage.
The findings from cross-national studies cannot tell you about the specifics of any given case. But the consistency of these findings is of obvious relevance to our interest in North Korea. Aid works best when the recipient country is committed to growth-oriented policies. Aid to autocracies is more likely to be corrupted although democracies are hardly immune; more importantly, aid is politically useful for dictators who use payoffs to sustain narrow coalitions of support. These problems can be solved in part, but only by careful design: by targeting, by using NGOs and by relying on technical assistance.
Ahmed, Faisal. 2012. “The Perils of Unearned Foreign Income: Aid, Remittances, and Government Survival.” American Political Science Review. 106, 1 (February): 146-165
Bueno de Mesquita et. al. 2009. “A Political Economy of Aid.” International Organization 63 (2): 309–340.
Burnside, C., and D. Dollar. 2000. Aid, Policies, and Growth. The American Economic Review 90 (4): 847–868.
Dietrich, Simone. Forthcoming. "Bypass or Engage? Explaining Donor Delivery Tactics in Foreign Aid Allocation." International Studies Quarterly.
Djankov, Simeon, Jose G. Montalvo, and Marta Reynal-Querol. 2008. “The Curse of Aid.” Journal of Economic Growth 13(3): 169–94.
Knack, Stephen. 2004. “Does Foreign Aid Promote Democ- racy?” International Studies Quarterly 48: 251–66.
Kono, Daniel, and Gabriella Montinola. 2009. “Does Foreign Aid Support Autocrats, Democrats, or Both?” Journal of Politics 71 (2): 704–718.
Licht, Amanda A. 2010. "Coming into Money: The Impact of Foreign Aid on Leader Survival." Journal of Conflict Resolution 54 (1): 58–87.
Svensson, J. 1999. “Aid, Growth and Democracy.” Economics & Politics 11 (3): 275– 297.
Winters, Matthew S. 2014. Targeting, Accountability and Capture in Development Projects. International Studies Quarterly.
Wright, Joseph, and Matthew S. Winters. 2010. The Politics of Effective Foreign aid. Annual Review of Political Science 13: 61–80.
Previous Academic Sources Posts
Faisal Z. Ahmed on the effect of remittances on the longevity of autocracies.
Jessica Weeks on types of autocracy and propensity for conflict.