The Impact of Aid on Bureaucratic Quality: Does the Mode of Delivery Matter?
Journal of International Development 24(3): 379-386, 2012
8 Pages Posted: 31 May 2012
Date Written: December 2010
We show that the impact of foreign aid on bureaucratic quality in recipient countries varies with the mode of delivery. Speciﬁcally, grants are found to impair the functioning of the bureaucracy, whereas loans are not. The negative impact of grants is larger when they are given as budget support rather than as assistance for speciﬁc projects or for programmes in general. Our results thus suggest that the probability of adverse effects rises with the degree of discretion recipients have over the incoming resources, which is in conﬂict with donors’ recent emphasis on strengthening local ownership by limiting the conditions attached to foreign aid.
Keywords: Foreign aid, bureaucratic quality, budget support, project aid, programme aid, grants, loans
JEL Classification: F35
Suggested Citation: Suggested Citation