Foreign aid, FDI and the personalization of power in autocracies

This article examines the relationship between foreign aid and foreign direct investment (FDI) and the degree of personalism in dictatorships. We contend that aid leads to higher personalism since it is a windfall that accrues to the government and does not require cooperation from elites to obtain it. Contrarily, we posit that FDI is linked to lower levels of personalism because it reshapes elites' incentives and influence as they may acquire new preferences, connections, and exit options, thus constraining dictators. Using data on Official Development Assistance (ODA) and FDI, and a latent index of personalism in autocracies, we find no robust evidence that ODA or FDI are correlated with personalism, but have some effect on some of the index's components.