14 Aid and Rent‐driven Growth: Mauritania, Kenya, and Mozambique Compared

Abstract

This paper conceptualises foreign aid as a geopolitical form of rent in order to help distinguish the conditions under which aid is detrimental to sustained economic recovery from those where it is beneficial. Foreign aid shares with natural resource rent and contrived (i.e., government monopoly) rent the property of being a large revenue stream that is detached from the economic activity that generates it, and elicits political contests for its capture. Rent-driven models suggest such contests have two adverse effects: (i) they deflect government incentives into rent-channelling at the expense of promoting wealth creation; and (ii) the resulting political allocation of the rent distorts the economy and precipitates a growth collapse, which is protracted. In this context, the three principal causes of aid failure identified in the literature (corruption, a poor policy environment and Dutch disease effects) are all symptoms of the destabilizing impact of rent streams on immature political economies. Consequently, the deployment of foreign aid to revive collapsed economies runs the risk of perpetuating rent-seeking and thereby postponing essential economic restructuring. This paper compares the varied impacts of aid on the development trajectories of Mauritania, Kenya and Mozambique. It argues …/.

Sovereign rents and quality of tax policy and administration

“…Like resource rents, aid revenues can reduce government's dependence on taxes from its own citizens, weakening its accountability to them. Collier (2006) calls aid and resource revenues ''sovereign rents" that generate dysfunctional rent-seeking behavior and tend to receive less scrutiny from legislators and citizens than other revenues (also see Auty, 2007). Fig.…”

Foreign Aid Effectiveness and Development Strategies in Eritrea: A lesson for Sub-Saharan African countries

“…Several studies based on cross-country regressions over large heterogeneous samples of countries have provided a wide range of contradictory results. For instance, Roodman (2008) argued that foreign aid has no effect or barely affects growth; similarly many others such as McKinley (2005), Easterly (2005), Collier (2006), Auty (2007) and Moyo (2009) further argued that aid even undermines growth in recipient countries. On the contrary others such as Sachs (2005), Karras (2006) and Minoiu and Reddy (2006) had suggested that foreign aid has a positive influence on economic growth.…”