Foreign aid and judicial autonomy

Abstract

Foreign aid donors increasingly embrace judicial autonomy as an important component of advancing democracy and promoting investment abroad. Recipient governments also recognize the importance of judicial reform for improving the investment climate at home. However, developing countries often lack the necessary state capacity that would enable them to implement these reforms. We argue that recipient countries that lack the state capacity to undertake reforms on their own turn to donors, who readily assist in judicial reforms via targeted democracy and governance interventions. At the same time, we suggest that the external assistance matters less for recipients that are able to implement judicial reforms by themselves. We employ an instrumental variable model to test this argument in a global sample of aid-eligible countries.