More donors, more democracy

In: Discussion paper series no. 640

Abstract

A country's democracy improves when it receives democracy aid from a larger number of donor countries. This finding appears surprising from a development perspective, as the presence of a large number of donors, and more generally 'fragmented aid', have been shown to impact negatively on the recipient country. But fragmented aid can be beneficial: Diversity on the donor side provides choice to the local actors involved in the process of democratization. It thus creates a 'marketplace of ideas' which increases the viability of the resulting institutions. In contrast, a highly-concentrated donor community can lead to the imposition of an institutional blueprint, designed in advance and not adapted to the needs of the recipient society. An instrumental variable analysis with panel data for 133 countries from 1994 to 2013, explicit tests of the causal mechanism, and anecdotal evidence from Ghana provide strong support for the benefits of diverse democracy aid.