How Information about Foreign Aid Affects Public Spending Decisions: Evidence from a Field Experiment in Malawi

121 Pages Posted: 27 Mar 2020

See all articles by Brigitte Seim

Brigitte Seim

University of North Carolina (UNC) at Chapel Hill

Ryan S. Jablonski

London School of Economics & Political Science (LSE) - Department of Government

Johan Ahlback

London School of Economics & Political Science (LSE) - London School of Economics

Date Written: March 3, 2020

Abstract

Does foreign aid shift public spending? Many worry that aid will be "fungible'' in the sense that governments reallocate public funds in response to aid. If so, this could undermine development, increase the poorest’s dependency on donors, and free resources for patronage. Yet, there is little agreement about the scale or consequences of such effects. We conducted an experiment with 460 elected politicians in Malawi. We provided information about foreign aid projects in local schools to these politicians. Afterwards, politicians made real decisions about which schools to target with development goods. Politicians who received the aid information treatment were 18% less likely to target schools with existing aid. These effects increase to 22-29% when the information was plausibly novel. We find little evidence that aid information heightens targeting of political supporters or family members, or dampens support to the neediest. Instead, the evidence indicates politicians allocate the development goods in line with equity concerns.

Keywords: fungibility, public spending, foreign aid, Malawi, Africa, distributive politics

Suggested Citation

Seim, Brigitte and Jablonski, Ryan S. and Ahlback, Johan, How Information about Foreign Aid Affects Public Spending Decisions: Evidence from a Field Experiment in Malawi (March 3, 2020). Available at SSRN: https://ssrn.com/abstract=3548125 or http://dx.doi.org/10.2139/ssrn.3548125

Brigitte Seim

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC 27514
United States

Ryan S. Jablonski (Contact Author)

London School of Economics & Political Science (LSE) - Department of Government ( email )

London
United Kingdom

HOME PAGE: http://ryanjablonski.wordpress.com

Johan Ahlback

London School of Economics & Political Science (LSE) - London School of Economics ( email )

United Kingdom

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