Why there Should be No Political Foreign Aid Curse

This paper considers the causality underlying the so-called political aid curse, which proposes that foreign aid, like oil, should hinder democracy. Using a theoretical model which identifies repression and appeasement as the primary alternatives to democratization, it argues that aid revenue should not produce a political curse because it is less fungible, more conditional, and less constant than state oil revenue, making it difficult for recipient governments to use their aid to fund either repression or appeasement. Using several different measures associated with repression and appeasement, the statistical results show that aid cannot be associated with any of these dependent variables.