On the potential of foreign aid to protect democracy against instability from trade

Thierry Kangoye
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Thierry Kangoye: CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique

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Abstract: In this paper, we examine the effects of a major source of instability, namely terms of trade instability on the quality of democracy, and we investigate whether foreign aid can dampen them. We take advantage of previous empirical findings explaining the role of aid in mitigating the adverse effects of external shocks, and argue that in the long term, aggregate aid flows can potentially dampen the effects of terms of trade instability on democracy. An empirical investigation with data from 71 developing countries over the period 1980-2003 provides supportive results. Moreover, the data suggest that terms of trade instability affects democracy through income instability.

Keywords: democracy; foreign aid; terms of trade instability (search for similar items in EconPapers)
Date: 2011-01-17
New Economics Papers: this item is included in nep-pol
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