Conditional Aid Under What Conditions? Exploring Consistency in Performance‐Based Aid Allocation

Abstract One of the instruments by which the European Union (EU) promotes democracy abroad is conditionality attached to its aid. By providing material incentives before countries meet a set of conditions (ex post) or after progress has been made (ex ante), the EU aims to alter the behaviour of third countries. Consistency in applying ex post and ex ante conditionality is essential for the EU's international credibility. Although extensive research has explored ex post conditionality, much less scholarly attention has been paid to ex ante conditionality. To address this gap, we ask: ‘Does the level of democracy impact EU aid allocation, and if so, is the EU consistent in applying ex ante conditionality?’ Empirically, we focus on aid from EU institutions allocated to the neighbourhood in its broader understanding—countries in the eastern and southern neighbourhood, as well as the Western Balkans and Turkey. Using time‐series cross‐sectional data that cover over 20 years of EU aid (2000–2020), we demonstrate that improvement in the democratic performance of beneficiaries is positively associated with more aid, suggesting that EU institutions indeed allocate aid based on democratic performance. The findings further reveal the lack of consistency in performance‐based aid allocation—the EU is more likely to reward improved democratic performance in strategically important neighbours. Namely, a higher level of democratic performance is associated with more aid in countries from which the EU imports energy. Additionally, countries from where migration originates receive more aid, disregarding their level of democracy. The findings reveal both the performance‐based and instrumental use of aid by EU institutions, contributing to the literature on EU credibility.