An aid-institutions paradox?

Todd Moss, Gunilla Pettersson and Nicolas van de Walle review the potentially negative effects of aid dependence on state-building in Sub-Saharan Africa and caution against blind increased aid pledges.

States which can raise a substantial proportion of their revenues from the international community are less accountable to their citizens and under less pressure to maintain popular legitimacy. They are therefore less likely to have the incentives to cultivate and invest in effective public institutions. As a result, substantial increases in aid inflows over a sustained period could have a harmful effect on institutional development in sub-Saharan Africa.

Also see Moss and Arvind Subramanian on After the Big Push?

As an aside, David Roodman, also of the Center for Global Development, has a new (though very technical and preliminary) paper out questioning whether the continued proliferation of aid projects will overburden developing countries with administrative costs. Some interesting ideas about the sunk costs of aid, aid projects as production functions and the points at which donors and recipients de-fund projects.