An aid-institutions paradox?: a review essay on aid dependency and state building in Sub-Saharan Africa

In this Working Paper, the authors suggest that despite recent calls for increased aid to poor countries by the international community, there may be an aid-institutions paradox. While donor intentions may be sincere, the authors conclude that it is possible that aid could undermine long-term institutional development, particularly in sub-Saharan Africa. By reviewing the evidence of the potentially negative effects of aid dependence on state institutions, the authors provide a thorough analysis of the institutional effects of aid.

The document concludes that:

• countries which receive a substantial portion of their revenues from foreign aid may be less accountable to their citizens, and they may face less domestic pressure to maintain popular legitimacy
• the more aid countries receive from abroad, therefore, the less incentive they have to invest in effective public institutions
• the donor community consider the aid-institutions paradox when making aid policy
• funding the eradication of endemic diseases, peacekeeping activities, regional or global public goods, and debt relief would most likely side-step the aid-institutions paradox