Foreign Aid, Instability, and Governance in Africa

This article contributes to the attendant literature by bundling governance dynamics and focusing on foreign aid instability instead of foreign aid. We assess the role of foreign aid instability on governance dynamics in 53 African countries for the period 1996‐2010. An autoregressive endogeneity‐robust generalized method of moments is employed. Instabilities are measured in terms of variance of the errors and standard deviations. Three main aid indicators are used, namely: total aid, aid from multilateral donors, and bilateral aid. Principal component analysis is used to bundle governance indicators, namely: political governance (voice and accountability and political stability/no violence), economic governance (regulation quality and government effectiveness), institutional governance (rule of law and corruption control), and general governance (political, economic, and institutional governance). Our findings show that foreign aid instability increases governance standards, especially political and general governance. Policy implications are discussed. Related Articles Beal, Amanda L., and Leah Graham. 2014. “Foundations for Change: Rule of Law, Development, and Democratization.” Politics & Policy 42 (3): 311‐345. doi.org Fails, Matthew D. 2014. “Leader Turnover, Volatility, and Political Risk.” Politics & Policy 42 (3): 369‐399. doi.org Jakubow, Alexander. 2014. “State Intervention and Life Satisfaction Reconsidered: The Role of Governance Quality and Resource Misallocation.” Politics & Policy 42 (1): 3‐36. doi.org