Donor Political Economies and the Pursuit of Aid Effectiveness

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.