Is Foreign Aid Effective? The View from Citizens in a Recipient Country

by Erik Voeten on September 6, 2012 · 14 comments

in Foreign Policy,International Political Economy

We are delighted to welcome the following guest post by Helen Milner (Princeton), Daniel Nielson (BYU), and Michael Findley (UT-Austin) in which they discuss the implications of a new working paper not presented at APSA.

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Is foreign aid effective? Much research on this question has focused on quantitative measures of large-scale outcomes like a country’s economic growth or level of democracy. These studies have come to mixed conclusions, and debate still rages over whether aid can effectively promote economic development, human rights, democracy, or countless other outcomes.

Prominent critics of aid, such as William Easterly and Dambisa Moyo, recite many of these studies’ findings about aid ineffectiveness.  Easterly and others attribute a good share of aid’s failings to the lack of feedback and accountability. As Easterly (2006:17) says, “The needs of the poor don’t get met because the poor have little political power with which to make their needs known and they cannot hold anyone accountable to meet those needs.”

We strongly agree with the point that feedback is a major problem for foreign aid. But criticisms of aid seem to assume that, in the absence of foreign funds, domestic governments would do a good—or even better—job helping the poor. However, we know that even in rich democratic countries the poor have a very hard time getting their voice heard by their own governments (Bartels 2008; Gilens 2012). The broken feedback loop motivated us to ask people in recipient countries what they thought of aid. In particular, we think the implicit assumption that governments in recipient countries are more attentive to the needs of the poor may be questionable.

We wanted to look at the question of aid effectiveness from a different angle.  What do the citizens in recipient countries think of aid? Do they perceive it to be useful and desirable? Few, if any, systematic studies of citizens’ views of aid in recipient countries have been conducted. Foreign donors sometimes collect such information, but do not release it for public consumption or scrutiny. To explore citizens’ reactions to aid, this summer we conducted a survey and field experiment on a nationally representative sample of Ugandans, as well as on a sample of local village council leaders, provincial governors, and members of parliament. We now have the data from roughly 3,600 Ugandan citizens, and our first report on these data is now available: http://ssrn.com/abstract=2134409.

We learned that Ugandans really like aid, and they want more of it. Uganda is a very poor country and it is heavily aid dependent. But even so, Ugandans by large majorities support additional foreign aid. More than 80% of respondents told us they wanted to see aid increased a lot as opposed to the one percent preferring that it be decreased substantially; 93% preferred at least some increase in aid versus 4% that preferred some decrease.

How do these results relate to aid effectiveness? Aid’s popularity seems to indicate that citizens in recipient countries see aid as beneficial.  However, nearly 80% of respondents also reported that they themselves have not directly benefited from aid, and nearly two-thirds of participants believed that more than half of aid dollars were not spent as intended.  How do we reconcile these beliefs with their strong desire for more aid?

It is critical to ask the question about aid effectiveness in a comparative way.  Is aid effective relative to other policies that could improve the quality of life for the public? This question of how aid compares to relevant alternatives is rarely asked. But it is key. We do not live in a perfect world; every policy has downsides and few may work at all. (Look at the long and intractable debates on macroeconomic policy where we have much evidence but no consensus.) So how does aid compare to other possible policies for serving the needs of Ugandans?

Our field experiment allowed us to address this question. We randomly assigned our nationally representative survey participants to receive information about identical projects sponsored by different foreign aid donors and compared them to a control group that was told about the projects without a donor specified, implying a domestic government initiative. This allowed us to compare foreign aid to government programs. We could also compare different donors to each other.

Data from our experiment clearly show that Ugandans significantly prefer foreign aid over government programs. Citizens are much more willing to pay personal costs by signing a petition or sending an SMS message to support aid projects than they are for government programs.  Our survey showed that citizens see aid as superior on many different dimensions. They view aid as less politicized, less corrupt, and more transparent than government programs. They also trust international organizations and foreign aid agencies more than all domestic government levels, including the popular president. And a large number of citizens support aid conditionality, where strict requirements must be met to receive future funds.

 

The study produced much evidence that Ugandans – when comparing the likely alternative of domestic programs – prefer foreign aid. Aid is not perfect, far from it, but it may be the best alternative for poor countries with weak domestic institutions and limited state capacity. And this may help explain why people strongly support aid, even if they do not benefit personally.

Ugandans had less intense preferences over which foreign donors were the best.  In general though, they preferred multilateral aid donors, such as the World Bank, to bilateral agencies, such as USAID. And this is despite the fact that bilateral donors bypass the government more in their aid projects relative to multilateral organizations. Again, citizens gave many of the same reasons as for their aid preferences in general: they saw multilateral assistance as more transparent and less politicized than bilateral aid.

A vigorous debate has raged for some time now over the effectiveness of foreign aid. Our study suggests that the views of citizens in recipient nations ought to be considered in the discussions.  Citizens in poor countries can provide vital insights about how well foreign aid works, especially compared to other feasible alternatives. Their views can inform our policy debates.  For instance, if large majorities in recipient countries want aid, as we find, should the donor countries reduce or end it? And if sizable numbers of citizens in recipient countries support aid conditionality, as our survey also reveals, should we end it, as some such as Easterly (2006) have proposed?

 

Bartels, L. M. (2008). Unequal democracy : the political economy of the new gilded age. New York Princeton, Russell Sage Foundation; Princeton University Press.

Easterly, William. 2006. The White Man’s Burden. NY: Penguin Press.

Gilens, Martin. 2012. Affluence and Influence: Economic Inequality and Political Power in America. Princeton University Press and Russell Sage.

Moyo, Dambisa. (2009). Dead aid : why aid is not working and how there is a better way for Africa. New York, Farrar, Straus and Giroux.

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