Does Foreign Aid Impact Civil Society?

Abstract

The proportion of foreign aid targeting or utilising civil society is large and has grown significantly in the past decade. The paper investigates the impact of aid on civil society across countries. We use a recently available novel dataset that contains several measures of civil society for 173 countries from 1900 to 2016. We focus on three measures of civil society- an index of the strength of civil society, and separately two components of the index-whether women are prevented from participating in civil society and the involvement of citizens in civil society organizations. We follow Jones et al., (2016) and Clemenset al., (2012) and estimate several models that tackle simultaneity allowing for causal interpretation. We find that neither foreign aid or foreign aid targeting civil society has an impact on our measures of civil society. Civil society growth appears to be driven by initial institutions, these results suggest that foreign aid focusing on civil society may not be as effective at improving the functioning of civil society within developing countries. This result is robust to different specifications and attempts to account for simultaneity. We also examine aid heterogeneity and find that the donor country is important for aid effectiveness. Aid from China has a negative impact on a countries' civil society relative to western member countries.

Keywords: Governance, Institutions, Foreign Aid, Civil Society

JEL Classification: O12