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Does foreign aid undermine political institutions?
A blog titled ‘Does foreign aid undermine political institutions?’ by Finn Tarp, Director of UNU-WIDER, and Sam Jones, Associate Professor, University of Copenhagen, was published on AidData's blog on 12 November 2015.
“The idea that aid weakens political institutions is based on the argument that increases in aid may substitute for domestic revenue, making governments less responsive to the needs of its people. Our findings challenge this simplistic story.”
The article discusses aid’s effects to state’s capacity to build well-functioning institutions. Based on a recent research, Tarp and Jones argue there is no evidence for the claim that aid has a negative effect on political institutions. Instead, stable flows of aid that are explicitly targeted towards governance have a moderate positive effect.
Using AidData’s most recent research release, the authors disaggregated aid into three types, and studied the effects of each type on institutional outcomes - concluding that institutional effects of aid depend on the type of aid and the frequency or credibility with which it is delivered. They suggest key to making progress is to recognize the diversity of aid types, each of which has its own objectives and predictability.