Democratic Reforms, Foreign Aid and Production Inefficiency

Dimitris Christopoulos, Gregorios Siourounis and Irene Vlachaki ()

MPRA Paper from University Library of Munich, Germany

Abstract: We construct an endogenous growth model and we employ empirical analysis to investigate the link between foreign aid and production efficiency in the presence of different political orientations of the recipient country. Using a panel of 124 countries from 1971 to 2007 and the production frontier toolbox, we document that regardless of income stratum, decade and type, foreign aid is associated with higher production inefficiency and that this inefficiency is reduced considerably if countries switch to democratic governance. Our study contributes to the aid literature by pointing to the institutional enhancement of the recipient countries through initially the adoption of democratic ruling practices.

Keywords: Democratic reforms; foreign aid; production inefficiency; translog function (search for similar items in EconPapers)
JEL-codes: C01 D24 F35 O43 (search for similar items in EconPapers)
Date: 2010-06
New Economics Papers: this item is included in nep-pol
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Related works:
Journal Article: Democratic Reforms, Foreign Aid and Production Inefficiency (2016)
Working Paper: Democratic Reforms, Foreign Aid and Production Inefficiency (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:23607

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