Hostname: page-component-78c5997874-v9fdk Total loading time: 0 Render date: 2024-11-05T04:17:16.840Z Has data issue: false hasContentIssue false
  • English
  • Français

The Perils of Unearned Foreign Income: Aid, Remittances, and Government Survival

Published online by Cambridge University Press:  16 January 2012

FAISAL Z. AHMED
FAISAL Z. AHMED*
Affiliation:
University of Oxford
*
Faisal Z. Ahmed is Prize Fellow, Nuffield College, University of Oxford, New Road, Oxford, UKOX1 1NF ([email protected]).
Get access Rights & Permissions [Opens in a new window]

Abstract

Given their political incentives, governments in more autocratic polities can strategically channel unearned government and household income in the form of foreign aid and remittances to finance patronage, which extends their tenure in political office. I substantiate this claim with duration models of government turnover for a sample of 97 countries between 1975 and 2004. Unearned foreign income received in more autocratic countries reduces the likelihood of government turnover, regime collapse, and outbreaks of major political discontent. To allay potential concerns with endogeneity, I harness a natural experiment of oil price–driven aid and remittance flows to poor, non–oil producing Muslim autocracies. The instrumental variables results confirm the baseline finding that authoritarian governments can harness unearned foreign income to prolong their rule. Finally, I provide evidence of the underlying causal mechanisms that governments in autocracies use aid and remittances inflows to reduce their expenditures on welfare goods to fund patronage.

Type
Research Article
Information
American Political Science Review , Volume 106 , Issue 1 , February 2012 , pp. 146 - 165
Copyright
Copyright © American Political Science Association 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Acemoglu, Daron, and Robinson, James. 2006. The Economic Origins of Dictatorship and Democracy. Cambridge: Cambridge University Press.Google Scholar
Ades, Alberto, and Di Tella, Rafael. 1999. “Rents, Competition, and Corruption.” American Economic Review 89 (4): 982–93.CrossRefGoogle Scholar
Ahmed, Faisal Z. 2010a. “Remittances Foster Government Corruption.” Ph.D. diss. University of Chicago.Google Scholar
Ahmed, Faisal Z. 2010b. “The Repression Effect.” Ph.D. diss. University of Chicago.Google Scholar
Alesina, Alberto, and Dollar, David. 2000. “Who Gives Foreign Aid to Whom and Why?” Journal of Economic Growth (March 5): 33–64.Google Scholar
Banks, Arthur. 2005. “Cross-national Time Series Data Archive” [Computer file]. Jerusalem. Databanks (accessed March 2009).Google Scholar
Bauer, Peter T. 1972. Dissent on Development: Studies and Debates in Development Economics. Cambridge, MA: Harvard University Press.Google Scholar
Beck, Nathaniel, Katz, Jonathan N., and Tucker, Richard. 1998. “Taking Time Seriously: Time-series–cross-sectional Analysis with a Binary Dependent Variable.” American Journal of Political Science 42 (4): 1260–88.CrossRefGoogle Scholar
Beck, Thorsten, Clarke, George, Groff, Alberto, Keefer, Philip, and Walsh, Patrick. 2006. The Database of Political Institutions. Washington; DC: World Bank.Google Scholar
Boix, Carles, and Stokes, Susan. 2003. “Endogenous Democratization.” World Politics 55 (July): 517–49.CrossRefGoogle Scholar
Brynen, Rex. 1992. “Economic Crisis and Post-rentier Democratization in the Arab World: The Case of Jordan.” Canadian Journal of Political Science 1 (March): 69–97.Google Scholar
Bueno de Mesquita, Bruce, and Smith, Alastair. 2009. “A Political Economy of Aid.” International Organization 63: 309–40.CrossRefGoogle Scholar
Bueno de Mesquita, Bruce, and Smith, Alastair. 2010. “Leader Survival, Revolutions, and the Nature of Government Finance.” American Journal of Political Science 54 (4): 936–50.Google Scholar
Bueno de Mesquita, Alastair Smith, Siverson, Randolph M., and Morrow, James. 2003. The Logic of Political Survival. Cambridge, MA: MIT Press.Google Scholar
Carter, David B., and Signorino, Curtis S.. 2010. “Back to the Future: Modeling Time Dependence in Binary Data.” Political Analysis 18 (3): 271–92.CrossRefGoogle Scholar
Chamberlain, Gary. 1980. “Analysis of Covariance with Qualitative Data.” Review of Economic Studies 47: 225–38.CrossRefGoogle Scholar
Chami, Ralph, Barajas, Adolfo, Cosimano, Thomas, Fullenkamp, Connel, Gapen, Michael, and Montiel, Peter. 2008. The Macroeconomic Consequences of Remittances. Washington, DC: International Monetary Fund.Google Scholar
Clarke, Kevin A., and Stone, Randall W.. 2008. “Democracy and the Logic of Political Survival.” American Political Science Review 102 (3): 387–92.Google Scholar
de la Garza, Rodolfo, and Hazan, Myriam. 2003. “Looking Backward, Moving Forward: Mexican Organizations in the U.S. as Agents of Incorporation and Dissociation.” Research report 6023, Tomas Rivera Policy Institute. http://www.trpi.org/PDFs/Looking_Backward.pdf (accessed September 28, 2011).Google Scholar
de Luna Martinez, Jose. 2005. “Workers’ Remittances to Developing Countries: A Survey of Central Banks on Selected Public Policy Issues.” Policy Research Working Paper, No. 3638. Washington, DC: World Bank.Google Scholar
Diaz-Cayeros, Alberto, Magaloni, Beatriz, and Weingast, Barry R.. 2003. “Tragic Brilliance: Equilibrium Hegemony and Democratization in Mexico.” Stanford University. Unpublished manuscript.CrossRefGoogle Scholar
Dunning, Thad. 2004. “Conditioning the Effects of Aid: Cold War Politics, Donor Credibility, and Democracy in Africa.” International Organization 58 (2): 409–23.CrossRefGoogle Scholar
Friedman, Milton. 1958. “Foreign Economic Aid: Means and Objectives.” Yale Review, 47 (4): 500–16.Google Scholar
Hunter, Shireen. 1984. OPEC and the Third World: The Politics of Aid. London: Croom Helm.Google Scholar
Knack, Stephen. 2003. “Effective Aid: How Democracy Allows Development Aid to Improve the Quality of Life.” World Development 31 (1): 1–22.Google Scholar
Knack, Stephen. 2004. “Does Foreign Aid Promote Democracy?” International Studies Quarterly 48: 251–66.CrossRefGoogle Scholar
Kono, Daniel, and Montinola, Gabriella. 2009. “Does Foreign Aid Support Autocrats, Democrats, or Both?” Journal of Politics, 71 (2): 704–18.Google Scholar
Leblang, David. 2010. “Familiarity Breeds Investment: Diaspora Networks and International Investment.” American Political Science Review 104 (3): 584–600.Google Scholar
Lemarchand, Rene. 1988. “Beyond the Mad Dog Syndrome.” In The Green and the Black, ed. Lemarchand, Rene. Bloomington, IN: Indiana University Press.Google Scholar
Lipset, Seymour M. 1959. “Some Social Requisites of Democracy.” American Political Science Review 53 (1): 69–105.Google Scholar
Mahdavy, Hossein. 1970. “The Patterns and Problems of Economic Development in Rentier States: The Case of Iran.” In Studies in the Economic History of the Middle East from the Rise of Islam to the Present Day, ed. M. A. Cook. Oxford: Oxford University Press.Google Scholar
Marshall, Monty G., and Jaggers, Keith. 2006. “PolityIV Dataset” [computer file; Version p4v2006]. College Park, MD: Center for International Development and Conflict Management, University of Maryland.Google Scholar
Milner, Helen, and Mukherjee, Bumba. 2009. “Democratization and Economic Globalization.” Annual Review of Political Science 12: 163–81.CrossRefGoogle Scholar
Morrison, Kevin. 2009. “Oil, Non-tax Revenue, and the Redistributional Foundations of Regime Stability.” International Organization 63: 107–38.Google Scholar
Neumayer, Eric. 2003. “What Factors Determine the Allocation of Aid by Arab Countries and Multilateral Agencies?” Journal of Development Studies 39 (4): 134–47.CrossRefGoogle Scholar
Obama, Barack. 2009. “Memorandum on Promoting Democracy and Human Rights in Cuba.” August 13.Google Scholar
Peters, Anne Mariel, and Moore, Peter W.. 2009. “Beyond Boom and Bust: External Rents, Durable Authoritarianism, and Institutional Adaption in the Hashemite Kingdom of Jordan.” Studies in Comparative International Development 44: 256–85.CrossRefGoogle Scholar
Ross, Michael. 2001. “Does Oil Hinder Democracy?” World Politics 53 (April): 325–61.Google Scholar
Singer, David. 2010. “Migrant Remittances and Exchange Rate Regimes in the Developing World.” American Political Science Review 104 (2): 307–23.CrossRefGoogle Scholar
Smith, Alastair. 2008. “The Perils of Unearned Income.” The Journal of Politics 70 (3): 780–93.CrossRefGoogle Scholar
Sovey, Allison J., and Green, Donald P.. 2011. “Instrumental Variables Estimation in Political Science.” American Journal of Political Science 55 (1): 188–200.CrossRefGoogle Scholar
Staiger, D., and Stock, James H.. 1997. “Instrumental Variables with Weak Instruments.” Econometrica 65 (3): 557–86.CrossRefGoogle Scholar
Werker, Eric, Ahmed, Faisal Z., and Cohen, Charles. 2009. “How Is Aid Spent? Evidence from a Natural Experiment.” American Economic Journal—Macroeconomics 1 (2): 225–44.CrossRefGoogle Scholar
Wright, Joesph. 2009. “How Foreign Aid Can Foster Democratization in Authoritarian Regimes.” American Journal of Political Science 53 (3): 552–71.Google Scholar
World Bank. 2005. “World Development Indicators, 2005.” (CD-ROM). Washington, DC: World Bank.Google Scholar
Yang, Dean. 2005. “International Migration, Remittances, and Household Investment: Evidence from Philippine Exchange Rate Shocks.” Economic Journal 118, 591–630.CrossRefGoogle Scholar
Submit a response

Comments

No Comments have been published for this article.