Democratization and Regional Development Banks: A Cross-Continental Comparative Analysis

The role of foreign aid in diffusing democratic values remains inconclusive. At the same time, membership in intergovernmental organizations (IGOs), containing a strong aid or transfer component, is associated with increasing democracy in their member states. This paper explores the impact of membership and loans of a particular type of IGOs, regional multilateral development banks (MDBs), on democracy diffusion in recipient member-states during the period of 1972-2008. Using a newly assembled database of MDB membership and lending, we find that membership in the International Bank for Reconstruction and Development and in the European Bank for Reconstruction and Development are both associated with an increase in democracy. By contrast, membership in other regional MDBs-African, Asian, and Inter-American Banks-saw mainly negative effects on democracy scores during the Cold War. Our results indicate that the impact of MDBs on democracy diffusion is highly dependent on the particular regional context, the MDB, and the historical period.