What shapes the prospect for democracy in the aftermath of civil conflicts? In my dissertation, I argue that both the economic utility from office as well as political conditionalities attached to foreign aid give rise to a rent-seeking/democracy dilemma for post-conflict elites: they can either hold elections and face uncertainty over their access to power, but secure economic rents from aid. Or they refuse to democratize, secure their hold on power, but risk losing revenues when donors withdraw aid. In this situation, elites’ optimal strategy is to agree to democratic reforms in the area on which donors place most value: elections. But to maximize their chances of electoral victory and continued access to rents from office, elites simultaneously restrain an independent rule of law and narrowly distribute private goods to their supporters.
This rent-seeking/democracy dilemma is particularly prevalent in one of the most popular forms of post-conflict institutions: power-sharing governments. Including rebel groups in post-conflict cabinets increases the number of constituencies that need to be sustained from the government budget. In addition, the interim nature of transitional power-sharing cabinets leads elites to steeply discount the future and increase rent-seeking in the short term. My main hypothesis is therefore that large aid flows to extensive power-sharing governments should be associated with improved elections, but limits in the rule of law and more provision of private instead of public goods.
To test this prediction quantitatively, I combine data on aid flows and rebel participation in post-conflict cabinets between 1990 and 2010 with indicators for democratic development, election quality, rule of law, and public goods provision. Results from a wide range of regression models provide empirical support for my argument. Individually, extensive power-sharing governments and large aid flows do not seem to have strong effects. Models that introduce an interaction term between aid and power-sharing, however, yield strong evidence of a rent-seeking/democracy dilemma: Power-sharing and foreign aid jointly predict a positive, but small change in democracy scores as well as cleaner elections. At the same time, they are jointly associated with a limited rule of law and stronger distribution of private goods. For each indicator, I document evidence for mechanisms and changes in the effect over time.