Allison Carnegie

Foreign Aid, Human Rights, and Democracy Promotion: Evidence from a Natural Experiment

Does foreign aid improve human rights and democracy? We help arbitrate the debate over this question by leveraging a novel source of exogeneity: the rotating presidency of the Council of the European Union. We find that when a country’s former colonizer holds the presidency of the Council of the European Union during the budget-making process, the country is allocated considerably more foreign aid than are countries whose former colonizer does not hold the presidency. Using instrumental variables estimation, we demonstrate that this aid has positive effects on human rights and democracy, although the effects are short-lived after the shock to aid dissipates. We adduce the timing of events, qualitative evidence, and theoretical insights to argue that the conditionality associated with an increased aid commitment is responsible for the positive effects in the domains of human rights and democracy.

International Institutions and Political Liberalization: Evidence from the World Bank Loans Program

How do international institutions affect political liberalization in member states? Motivated by an examination of the World Bank loans program, we argue that institutions can confer prestige in exchange for political reforms. When offered an opportunity to improve their institutionally-conferred status, thereby boosting their international and domestic reputations, states are willing to make policy concessions in exchange. To test our theory, we exploit a unique feature of the World Bank loans program: when a loan recipient reaches a specified level of economic development, it becomes eligible to graduate from borrower status. Although graduation entails losing access to loans, governments typically seek to graduate. We show that governments view graduation as an indicator of the transition from a developing state to a developed state. Using a unique regression discontinuity design, we demonstrate that when states become eligible for graduation, their governments democratize to achieve this enhanced status. Thus, a governments interest in improving its status in the international system can motivate domestic reform.