Donor Political Economies and the Pursuit of Aid Effectiveness

Abstract

In response to corruption and inefficient state institutions in recipient countries some foreign aid donors decrease bilateral government-to-government aid flows and increase the share of bilateral aid by outsourcing delivery to non-state development actors. Other donor governments continue to support state management of aid despite corruption and inefficiency, seeking to strengthen recipient states. These cross-donor differences can be attributed in large measure to different national orientations about the appropriate role of the state in public service delivery. Countries that place a high premium on market-efficiency (e.g. US, UK, Sweden) will outsource aid delivery in poorly governed recipient countries to improve the likelihood that aid reaches the intended beneficiaries of services. In contrast, states whose own political economies emphasize a strong state in service provision (e.g. France, Germany, Japan) continue to support state provision. This argument is borne out by a variety of tests, including statistical analysis of dyadic time-series cross-section aid allocation data and individual-level survey data on a crossnational sample of senior foreign aid officials. To understand different aid policies, one needs to understand the political economies of donors.

What determines earmarked funding to international development organizations? Evidence from the new multi-bi aid data

“…Acht et al (2015) find that the economic self-interest of donors in recipient countries weakens donors' rationale for bypassing the government. Dietrich (2016) shows that the share of 'bypass' aid a donor provides in low-governance countries interacts with the political economy in donor countries. Specifically, the market-orientation of donors' economies, such as their stance on outsourcing public service delivery domestically, positively correlates with the degree of 'bypassing' recipient governments in weakly-governed countries.…”

“…We contribute to the literature by separately examining earmarked aid, a subset of the 'catch-all' bypass aid, and by analyzing earmarked aid over an extended period of time. While the analysis in Acht et al (2015) is purely cross-sectional and relies on 2008 data, Dietrich's (2016) study is based on the period spanning 2005, the first year the channel code variable was consistently used by donor countries, to 2011. Additionally, we test for the official donor motives about recipient need whenever quantitatively possible.…”

“…21 In the dyadic regressions, recipient governance is a standardized governance variable for all and not only weakly-governed recipient countries. Dietrich (2016) argues that donors' stance domestic practice of outsourcing public service delivery is related to their likelihood of delegating the delivery of aid abroad. We test her argument following her definition of 'liberal market economy,' that is derived from the 'Varieties of Capitalism' literature, and measured by the time-invariant binary variable market-oriented donor economy.…”

“…While support for the own government has decreased over time, international 21 To maximize the number of available observations, we construct a standardized measure of governance that combines (standardized) information from the average of the six World Bank Governance Indicators or the ICRG index on political stability. 22 Market-oriented donor economies are Australia, Canada, Ireland, New Zealand, the Scandinavian countries (Sweden, Norway, Denmark, and Finland), the United Kingdom, and the United States (Dietrich 2016). 23 Applying Milner's (2006) argument to this alternative question stretches her theory, which she tested using survey responses about the appropriateness of the own governments' current aid budgets.…”

Do Government and Foreign Funding Influence Individual Donations to Religious Nonprofits? A Survey Experiment in Pakistan

“…Public administration scholars have employed survey experiments to understand the perceptions and beliefs of policy actors (Karens et al 2016;Grimmelikhuijsen et al 2017). Dietrich (2016) tests how donor agency officials from different countries respond to corruption and inefficient state institutions in recipient countries. Andersen and Jakobsen (2017) test how bureaucrats react to communication cues and find that communication frames and cues that align policies with norms are more likely to move bureaucrats' policy positions in favor of the policies.…”