Foreign Aid in Areas of Limited Statehood

42 Pages Posted: 15 Mar 2017

See all articles by Axel Dreher

Axel Dreher

Heidelberg University

Valentin F. Lang

Heidelberg University

Sebastian Ziaja

University of Essex - Department of Government; German Development Institute/Deutsches Institut für Entwicklungspolitik (DIE)

Date Written: February 20, 2017

Abstract

We review the aid effectiveness literature to assess whether foreign aid given to areas of limited statehood can be expected to promote economic and social outcomes in the recipient country. We distinguish different types of aid, motives for granting it, recipient country policies and characteristics, and modalities by which aid is delivered, as these factors have been argued to influence the effectiveness of aid. In short, aid is most likely to be successful if given for non-strategic motives, and if given to recipient countries with “good” policies and democratic institutions. Fragmented aid and aid amounts that exceed the absorptive capacity of the recipient reduce the effectiveness of aid. We then compare these properties between recipients most affected by limited statehood and those least affected. This allows us to assess the relative effectiveness of aid in countries with areas of limited statehood. We conclude that on average aid given there is less likely to be effective than elsewhere.

Keywords: aid effectiveness, fragile states, limited statehood

JEL Classification: F350, H770, O470, O570, P260

Suggested Citation

Dreher, Axel and Lang, Valentin F. and Ziaja, Sebastian, Foreign Aid in Areas of Limited Statehood (February 20, 2017). CESifo Working Paper Series No. 6340. Available at SSRN: https://ssrn.com/abstract=2932759

Axel Dreher (Contact Author)

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

HOME PAGE: http://www.axel-dreher.de

Valentin F. Lang

Heidelberg University ( email )

Sebastian Ziaja

University of Essex - Department of Government ( email )

Wivenhoe Park
Colchester CO4 3SQ, CO4 3SQ
United Kingdom

German Development Institute/Deutsches Institut für Entwicklungspolitik (DIE) ( email )

Tulpenfeld 6
Bonn, 53113
Germany

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