Aid and good governance: Examining aggregate unintended effects of aid

Abstract

Although donors generally aim to improve governance in recipient countries by various means, critics claim that the aggregate effect of large aid flows is the deterioration of governance. Aid is said to weaken domestic accountability, sustain authoritarian regimes, increase political instability, weaken government capacities, and increase corruption. Conducting a systematic search in Web of Science, this paper reviews the empirical evidence for these unintended aggregate effects of aid on the political, administrative, and judicial dimensions of good governance. It finds that the negative effects of aid on governance are much exaggerated. The aggregate effect of aid on democracy has become more positive after the Cold War, and the effect of aid on government capacity and on reducing corruption has also improved over time. Furthermore, most studies show a positive effect of aid on political stability. These findings imply that donor intentions matter: donors that are serious about their intended effects on governance are able to mitigate the possible negative unintended effects of their aid.