Development without Freedom: How Aid Underwrites Repression in Ethiopia

Human Rights Watch

Foreign donors insist that their support underwrites much-needed agricultural growth, food security, and other putatively non-political programs. However, Human Rights Watch research shows that development aid flows through, and directly supports, a virtual one-party state with a deplorable human rights record. Ethiopia’s practices include jailing and silencing critics and media, enacting laws to undermine human rights activity, and hobbling the political opposition.  continue reading»

Does foreign aid improve governance?

Matthias Busse, Steffen Gröning

This paper analyses the impact of aid flows on governance. Using an instrumental variable approach and a large country sample, we find that aid has a negative rather than a positive influence on governance. This outcome is robust to various model specifications. continue reading»

Aid with multiple personalities

Simeon Djankov, Jose G. Montalvo, Marta Reynal-Querol

The existing research on foreign aid offers inconclusive evidence on the factors that make aid effective. In this paper, we study the supply of aid money in 112 developing countries over the period 1960–1999 and find that the presence of multiple donors in a given country renders aid less effective. In particular, an aid-receiving country at the median of the donor fractionalization distribution will grow one percentage point faster than a country at the 75th percentile. This is in part because donor fragmentation is associated with increased corruption in the recipient country’s government. continue reading»

The curse of aid

Simeon Djankov, Jose G. Montalvo, Marta Reynal-Querol

Foreign aid provides a windfall of resources to recipient countries andmay result in the same rent seeking behavior as documented in the “curse of natural resources” literature. In this paper we discuss this effect and document its magnitude. Using panel data for 108 recipient countries in the period 1960–1999, we find that foreign aid has a negative impact on institutions. In particular, if the foreign aid over GDP that a country receives over a period of 5 years reaches the 75th percentile in the sample, then a 10-point index of democracy is reduced between 0.5 and almost one point, a large effect. For comparison, we also measure the effect of oil rents on political institutions. We find that aid is a bigger curse than oil. continue reading»

New Estimates of Capital Flight from Sub-Saharan African Countries: Linkages with External Borrowing and Policy Options

Léonce Ndikumana and James K. Boyce

Over the past decades, African countries have been forced by external debt burdens to undertake painful economic adjustments while devoting scarce foreign exchange to debt-service payments. On the other hand, African countries have experienced massive outflows of private capital towards Western financial centers. Indeed, these private assets surpass the continent’s foreign liabilities, ironically making sub-Saharan Africa a “net creditor” to the rest of the world. continue reading»

Development and the Political Economy of Foreign Aid

Jason Sorens

This essay critically reviews findings on the economic effects of foreign development aid and lending, and on the “high” and “low” politics of aid. Although aid appears not to increase growth, reduce corruption, or increase revenues in recipient countries, donor countries are unlikely to reform aid and lending programs because these programs successfully serve political purposes. Alternatives to publicly funded aid are considered. continue reading»

Why foreign aid to Haiti failed

National Academy of Public Administration

Although it proudly lays claim as the second oldest republic in the Hemisphere, and the only nation whose slave population defeated a colonial power to become free,Haiti is, and has been, among the worst governed and most undemocratic states. Few places in the world, and no places in the Western Hemisphere, are poorer than Haiti.This paper2 explains why, after consuming billions in foreign aid over three decades, and hundreds of millions specifically for governance and democratization programs, not to mention billions for other programs, Haiti remains politically dysfunctional and impoverished.  continue reading»