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Whether foreign aid promotes or hinders democratic institutions has been debated with opposing views. This paper investigates short- and long-run effects of foreign aid on democratization in post-conflict Cambodia using autoregressive distributed lag bounds testing and Gregory–Hansen structural break testing approach for cointegration over 1980–2015 period. The findings reveal that net bilateral foreign aid per capita, aggregated and classified into purpose-based ‘governance aid’, ‘economic aid’, ‘other aid’ and ‘donor-specific aid’ from the US, EU, France, Australia and Japan, promote long-run democratization. In the short run, only governance and economic aid appear to have a consistent positive effect on democratization.

Recent decades have witnessed an unprecedented expansion of democracy. During the third wave of democratization, as described by Samuel Huntington, democracy spread well beyond its historical boundaries and it is now adopted in all major regions of the world. Yet, not all democracies are equally effectual in delivering good governance and progrowth policies. Why do democratic institutions induce good governance and prosperity only in some economies? This paper presents an overview of the dimensions along which successful and unsuccessful democracies differ. It argues that four socioeconomic variables are of critical importance to create and maintain a well-functioning democracy: (i) social capital, (ii) information, (iii) education, and (iv) equality. History also plays an important role as do the contingencies characterizing the collapse of authoritarian regimes and the emergence of democratic institutions.

The remarkable levels of economic development associated with East Asia continue to attract attention. Significantly, the primary driver of East Asian economic development in the future looks likely to be China rather than Japan. Passing the baton of economic leadership in the region is significant not just for geopolitical reasons — China is, after all, notionally a ‘communist’ country and not aligned to the US — but also because the political systems that underpin economic development in China and Japan are so very different. China is an unambiguously undemocratic, authoritarian regime and its growing economic and political importance has potentially profound implications for East Asia and the wider international system. As a consequence, the possible relationship between economic and political development will come under renewed scrutiny as given the geopolitical and comparative significance of China’s rise in particular. At the very least, it is entirely possible that the authoritarian forms of politics that were associated with state-led industrialisation processes across much of the region in the post-war period may not disappear. On the contrary, the success of China’s economic development in particular may prove an attractive role model or source of legitimation for other regimes that may not be enthusiastic about initiating wholesale political reform or encouraging democratisation…