Aid, Reform, and Interest Groups

Heckelman, Jac C and Wilson, Bonnie (2023): Aid, Reform, and Interest Groups.

Abstract

Employing a political economy perspective, we seek to understand the seeming failure of aid to promote institutional reform. A la Stigler's theory of regulatory capture, we suppose that institutions are determined via a process of exchange and that special interest groups may capture institutions. We interpret grants of aid as a shock to the market for institutions and hypothesize that the impact of aid on institutional reform is conditional on the influence of groups. Based on a panel of 92 aid-receiving nations, we find evidence consistent with a political economy perspective and our hypothesis. In particular, we find that aid has had a positive impact on reform in countries with especially low levels of market-orientation in institutions and middling to large numbers of groups, and that aid has been associated with back-sliding on reform in many other countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: aid, reform, institutions, special interest groups
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O19 - International Linkages to Development ; Role of International Organizations; P - Economic Systems > P1 - Capitalist Systems > P11 - Planning, Coordination, and Reform

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