AIDING OR FAILING THE BUREAUCRACY?
FOREIGN AID IN CENTRAL GOVERNMENT BUREAUCRACIES

Abstract

How does foreign aid shape bureaucratic incentives and impact bureaucrats' performance? Despite the large amounts of development assistance directed towards the public sectors of developing countries across the world, this question has gone largely unanswered in the literature. This is a critical gap since bureaucrats are key to the implementation of development programs and undergird state capacity. In this dissertation, I argue that aid alters bureaucrats' incentives and drives them to make tradeoffs between their regular government duties and aid projects. As a result, performance on aid projects is boosted at the expense of government programming and organizational coherence.

I test my argument using a combination of observational panel, qualitative, and survey experimental data. For my panel, I draw on data that runs across 161 countries over a period of 17 years. My qualitative data consists of interviews of 64 bureaucrats across various ministries and agencies in Uganda's central government. My survey experimental data comprises responses from 559 mid-level bureaucrats across 6 ministries and approximately 70 departments, also in Uganda's central government. As one of the top recipients of aid in Africa, Uganda provides an ideal context for understanding how development aid impacts recipient governments.

Evidence from the panel data suggests that increased dependency on project aid lowers a country's bureaucratic quality. The qualitative and experimental findings demonstrate the mechanisms that drive these findings. The qualitative results show that aid projects disrupt bureaucratic hierarchies, distort bureaucrats' incentives, and undermine government programming. These findings are supported by the experimental results, which show that bureaucrats are willing to allocate effort away from their regular government duties and towards aid projects as financial incentives on aid projects increase. Taken together, the results highlight that in endeavouring to ensure the success of relatively short term aid programs, donors may compromise bureaucratic capacity.

This comprehensive analysis, building upon rich descriptive insights to link individual-level to state-level effects, provides a critical lens into the mechanisms underlying how aid works and the possible implications for both aid effectiveness and state capacity. The findings challenge donors' reliance on project aid as a disbursement modality and underscore a need to reevaluate the role of aid in the bureaucracies of developing countries.