Foreign aid and repression

Despite the democracy-enhancing intentions of most donors, foreign aid can often offer opportunities for governments to politically repress their populations. This chapter argues and presents evidence that aid from the world's largest bilateral donor - the United States - harms political rights in recipient countries. US aid does so by weakening government accountability via the taxation channel. US aid lowers a government’s incentive to collect taxes. And this reduction in tax effort is negatively associated with political rights. These findings run counter to the stated intentions of the US government - and other bilateral donors - to foster political liberalization abroad via bilateral economic assistance.