Political Power and Aid-Tying Practices in the Development Assistance Committee Countries

Abstract

This paper uses a panel of 22 OECD Development Assistance Committee countries to examine whether fragmentation of executive power and the degree of competition from the legislative branch of government increased the amount of tied aid over the period 1979–2009. Fragmentation is defined as the degree to which the costs of a dollar of aid expenditure are internalized by decision-makers and is measured as the number of decision-makers in government. Legislative competition is defined as the relative strength of the government in relation to the legislature. Three variables are used to capture this effect. The empirical results show tied aid, both in levels and as a percentage of total aid, increases as the number of decision-makers within the government increases, and decreases as the proportion of excess seats a governing coalition holds above a simple majority increases.