The perils of unearned foreign income: Aid, remittances, and government survival

Faisal Z. Ahmed

Research output: Contribution to journalReview articlepeer-review

187 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)146-165
Number of pages20
JournalAmerican Political Science Review
Volume106
Issue number1
DOIs
StatePublished - Feb 2012
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Sociology and Political Science
  • Political Science and International Relations

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