American Political Science Review

Research Article

The Perils of Unearned Foreign Income: Aid, Remittances, and Government Survival

FAISAL Z. AHMEDa1 c1

a1 University of Oxford

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.

Correspondence:

c1 Faisal Z. Ahmed is Prize Fellow, Nuffield College, University of Oxford, New Road, Oxford, UK OX1 1NF (faisal.ahmed@nuffield.ox.ac.uk).

Footnotes

I thank the APSR co-editors, four anonymous referees, Chris Berry, William Howell, Helen Milner, Kevin Morrison, Jong Hee Park, Jon Pevehouse, David Singer, Duncan Snidal, John Stevenson, and seminar participants in the Chicago PIPES Workshop and the International Political Economy Society Conference for valuable comments and suggestions.

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