Why, according to the selectorate approach, does foreign aid inhibit democratization in recipient countries?
What will be an ideal response?
Ans: The selectorate explanation claims that foreign aid recipients become less democratic after they get foreign aid. The reason is that foreign aid is intended to purchase policy concessions from the recipient. These policy concessions are contrary to what the citizens of the recipient country want (if this was what they wanted, then the donor wouldn’t have had to pay for it). This might increase the probability of popular unrest in the recipient country. The recipient leader can respond to popular unrest by expanding or by contracting the amount of public goods that he provides to the citizens, including coordination goods. Leaders who have “free” income (natural resources or foreign aid) are more likely to respond to a revolutionary threat by contracting the amount of public goods they provide compared to leaders who rely on income taxes as their main source of revenue. After reducing public goods, these leaders also have to adjust their institutions to the new allocation of resources. They do so by purging some of the members of their winning coalition (if they provide fewer public goods, then the loyalty norm increases and they do not need as many coalition members as they needed before). The result is that leaders who receive foreign aid end up with a smaller W after receiving aid. Thus, foreign aid inhibits democratization.
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