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SUMMARY In this article, I analyze the relationship between budget support and ownership, or recipient‐country control over policy outcomes, by exploring how budget support donors in Rwanda and Tanzania attempt to exert influence over domestic policy processes. In contrast to the conventional rhetoric about budget support, my empirical analysis finds little evidence that budget support decreases the influence that donors try to exert over recipient‐country governments. Instead, semi‐structured interviews with donor and government representatives in each country suggest that the aid modality is often used as a tool by which donors attempt to increase their leverage over domestic decision‐making. In particular, I identify three mechanisms frequently used by budget support donors to influence domestic policy processes: voice amplification, a seat at the table, and a license to ask questions. Copyright © 2013 John Wiley & Sons, Ltd.

Under what conditions are foreign aid donors willing to suspend foreign aid to punish political transgressions, such as election fraud, corruption scandals or political repression? Prior scholarship has emphasized that political sanctions, including foreign aid suspensions, are constrained by the geostrategic considerations of donor countries. However, foreign aid suspensions often occur in strategically important countries, and donors respond differently to different types of political transgressions within the same county. To shed light on this puzzle, in this article, I present evidence from an original survey of top-level donor representatives in 20 African countries, including a list experiment designed to elicit truthful responses about the conditions under which donors are willing to suspend foreign aid. I argue that the likelihood of a foreign aid suspension depends not only on the strategic considerations of the donor government, but also on the institutional incentives of the donor agency. A donor agency's institutional incentives are shaped by the agency's organizational design, as well as by its foreign aid portfolio in the recipient country.

Motivation: Budget support is the form of aid most commonly associated with recipient-country ownership. However, a number of scholars and practitioners have criticized the approach as masking new forms of conditionality. Was budget support simply a guise for increasing donor influence in recipient countries? How can we explain the rapid shift towards budget support, as well as the rapid decline in its popularity after only a few years? Purpose: We use a bargaining framework to explain the rise and fall of budget support. Contrary to explanations that suggest that budget support was a normative decision by donors designed to increase aid effectiveness by fostering ownership, a bargaining framework emphasizes that aid policy is the result of sustained negotiations between donors and recipients. These negotiations, however, are constrained by donors' inability to deliver aid as promised. Approach: We use a Nash bargaining framework to formalize the predictions of a bargaining model. From the model, two testable predictions emerge: (1) in exchange for more credible commitments, recipient governments are willing to selectively offer donor agencies greater access to and influence over domestic policy decision-making; and (2) in exchange for such influence, donor agencies are willing to exert less pressure on recipients to be politically inclusive. We then test the implications of the model using case-study evidence from Rwanda and Tanzania. Findings: The empirical data, based on over 80 interviews with practitioners over several periods of research in both countries, provide substantial evidence in support of the model's core assumptions and predictions. Contrary to claims that budget support increased recipient-country ownership, interviews (identified as personal communications) suggest that, in exchange for more credible commitments, recipient governments were willing to grant donors greater access and influence. In return, donor agencies reduced demands on the recipient government regarding political inclusivity, tacitly accepting arrangements that centralized decision-making and excluded civil society. When donor agencies could no longer provide budget support as promised, these negotiated arrangements broke down. Policy Implications: The findings challenge a common narrative that donors embraced budget support because of a normative commitment to ownership. They also demonstrate the value of a bargaining framework.

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