The Role of Political Institutions in Swedish Aid Allocation

Sammanfattning

This thesis examines whether democracy influences the allocation of Swedish aid across different distribution channels and sectors, and how this is related to determinants of donor behavior. Previous research within this field has mainly focused on differences in aid allocation across donor countries, while less attention has been given to the underlying drivers of aid allocation within individual donor countries. To address this research gap, this thesis applies an event study framework to analyse how Swedish aid allocation responds to democratic transitions and democratic breakdowns in recipient countries, together with fixed effects panel regressions examining how distribution across channels and sectors relates to democratic development and Sweden’s stated objectives. The analysis is based on a recipient country-year panel dataset covering the period 2006 to 2024. The results suggest that Swedish aid allocation is related to democratic development to some extent and that changes in democracy may influence both the level and distribution of aid allocation. The findings further indicate that aid allocation across channels and sectors differ depending on recipient country characteristics and may reflect the importance of aid effectiveness and institutional quality in aid allocation decisions. However, the estimated effects are generally small and often statistically insignificant. Overall, this thesis contributes to existing previous literature by providing a deeper analysis of how political institutions may relate to Swedish aid allocation across channels and sectors.