Foreign Aid and the Performance of Bureaucrats

• In Event: Economic Instruments of Foreign Policy

Abstract

Foreign aid is an important source of funding for development projects in many countries. However, aid effectiveness remains uncertain. While previous studies have explored a multitude of reasons for this ambiguity, little work has examined the crucial impact of aid on bureaucrats -- the individuals responsible for implementing a large share of aid projects and who make states work. In this cpaper, I focus on how aid alters bureaucrats’ financial incentives, social preferences, and performance. I utilize survey experimental data collected from 559 bureaucrats across 6 primary central government ministries in Uganda. I show that bureaucrats have strong preferences for the increased financial incentives attached to aid projects. However, increased financial incentives do not displace their desire for work related social preferences that are susceptible to aid induced distortions such as autonomy, equity, and coordination with peers. At the same time, at relatively high levels, increased financial incentives displace bureaucrats' effort away from their regular government work and towards aid projects. Thus, even as international donors incentivize bureaucratic effort on their own short-term projects, that comes at the expense of overall bureaucratic efficacy.

Author

• Maria Nagawa, Princeton University