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Aid Management, Trust, and Development Policy Influence: New Evidence from a Survey of Public Sector Officials in Low-Income and Middle-Income Countries

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Abstract

Bilateral and multilateral development agencies spend a great deal of time, money, and effort trying to shape the reform priorities and processes of their counterpart countries. However, the means by which development agencies can achieve these ends are poorly understood. This article draws upon the first-hand experiences and observations of more than 1000 public sector officials from 70 low- and middle-income countries to better understand which external sources of reform advice and assistance are most and least useful to public sector decision-makers—and why. We find that donors more effectively shape reform priorities when they choose to deliver their funding through the public financial management systems of counterpart countries, rather than using channels of aid delivery—in particular, technical assistance programs—that bypass host governments and signal a lack of trust in the motivations and capabilities of the local authorities. This finding holds true even after controlling for institutional quality, or the trustworthiness of public sector institutions, in aid-receiving countries. As such, our results call attention to the fact that development agencies can amplify their policy influence by entrusting their counterpart governments with aid management responsibilities.

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Notes

  1. Most statistical studies of aid and its impact on reforms in developing countries rely on aggregate country-level measures of development outcomes and shed little light on how donors affect reform priorities (e.g., Minoiu and Reddy 2010; Stone 2010).

  2. Kydd (2007: 3) defines trust as “a belief that the other side is trustworthy, that is, willing to reciprocate cooperation, and mistrust as a belief that the other side is untrustworthy, or prefers to exploit one’s cooperation.”

  3. Conversely, the suspension of such budgetary support “indicate[s] a strong signal from the donor to the recipient: it implies a breach in the trust relationship” (Molenaers et al. 2015: 63).

  4. Technical assistance is defined as projects or programs “whose primary purpose is to augment the level of knowledge, skills, technical know-how or productive aptitudes of the population of developing countries” (http://www.oecd.org/investment/stats/31723929.htm#36,37,38,39).

  5. However, donors sometimes target technical assistance to “sympathetic interlocutors”—or host government officials who share the same development policy beliefs and preferences as their foreign sponsors—when they do not have confidence in the general policy direction of a host government but still wish to exert policy influence in specific issue domains or institutions (Chwieroth 2007; Bazbauers 2019; Parks and Davis 2019).

  6. This point is echoed in Easterly and Pfutze (2008: 17): “technical assistance is … very often tied and often … [reflects] donor rather than recipient priorities.”

  7. Helleiner (2000: 84) argues that technical assistance is “little more than a device for the monitoring and enforcement of external conditions.”

  8. Of course, recipient countries also demonstrate varying levels of trustworthiness, as indicated by the quality of the public financial management systems (Knack 2014). We are interested in the decisions that donors make to channel their money through or around country systems, after controlling for the varying quality of recipient country systems.

  9. This is only one way donors can signal their trustworthiness to partner governments. Consistent, long-term engagement in a given country or country-sector is another way that donors can signal their trustworthiness (Custer et al. 2015; Steinwand 2015).

  10. We defined our population of interest as those individuals with direct knowledge of how government policies and programs were prioritized, designed, and implemented between 2004 and 2013 in each country. Appendix B explains how these non-response weights are constructed.

  11. Parks et al. (2015) describe the inclusion criteria and procedures employed to develop the sampling frame.

  12. In total, 3400 host government officials participated in the survey. Approximately 2000 of those public officials had experience working directly with bilateral or multilateral donors. Respondents only had the opportunity to assess the influence of donors with whom they directly interacted during a defined period of time between 2004 and 2013. The sample is bounded by the geographic availability of data from the Paris Declaration Monitoring Survey (PDMS)—the primary source used to measure each donor’s use of in-country public financial management systems.

  13. These specific reforms were identified by respondents when asked to identify up to three specific problems that government reforms (in the respondent’s area of policy expertise) sought to address. Each respondent was asked to select his or her primary area of focus (from a list of 23 policy areas) and anchor on a specific public sector job and institution (with a defined start/end year) in a given country between 2004 and 2013. Respondents were then asked to evaluate the influence of specific donors from the vantage point of his or her policy area of focus and country in that particular position and time period.

  14. We use the terms “policy influence” and “agenda-setting influence” interchangeably to refer to our dependent variable in this study.

  15. Two studies provide evidence that the dependent variable in this study measures what it purports to measure (Masaki and Parks 2020; Parks and Davis 2019). For one bilateral donor (the U.S. Government’s Millennium Challenge Corporation) and one multilateral donor (the World Bank), there is a positive correlation between respondent evaluations of donor influence and independently-generated measures of policy reform.

  16. Our sample size varies across models based on the specific covariates that are included (see Table 1). Some respondents were asked to evaluate the influence of specific institutions under the same donor country (e.g., GIZ, KfW, and German Embassy for Germany) or multilateral organizations (UNDP and UNCEF for the UN). Thus, it is plausible that some respondents evaluated more than one donor agencies or organizations under the same donor country or multilateral organization. We average responses by donor country or multilateral organization in these cases.

  17. For instance, a donor’s financial weight vis-à-vis other donors in a particular recipient country is a contextual characteristic specific to each donor-recipient country dyad, while respondents’ beliefs about which domestic political actors supported reform efforts vary across individuals.

  18. These trust variables are from questions 8–11 in the PDMS questionnaire.

  19. Given that some respondents held their government positions for only a single year, calculating a coefficient of variation only for the years in which the respondent held his or her government position would dramatically increase missingness.

  20. Unless otherwise noted, we merge country-level covariates with the survey data based on a respondent’s start year. Each respondent assessment of the agenda-setting influence of a given donor is based on the period of time in which he or she held a government position in his or her respective country between 2004 and 2013.

  21. This variable measures the amount of project-level information disclosed by a donor to a recipient country in a given year by calculating the percentage of projects that provide a title, a long description of the project’s purpose, the name of financing agency, and description of the type of financing provided (e.g. a grant or a loan).

  22. This result is surprising in light of existing research, which suggests that transparency is positively associated with trust among the general public. One potential explanation for this unexpected finding is that host government officials interpret lower levels of transparency as conveying greater trust that the government will use aid responsibly since it implies less of a need for the public to monitor the use of aid funds. However, this is clearly an ex post speculation and future research should further explore if and how transparency matters differently to different audiences.

  23. In this regard, our results support the claim that “it can be said with some confidence that the achievement of higher levels of mutual trust between aid donors and recipients would be good for aid effectiveness and poverty reduction” (Mosley and Abrar 2006: 324).

  24. Technical assistance can, in certain circumstances, be a useful and effective way of transferring skills and technical know-how to partner countries (Annen and Kosempel 2009; Mikami and Furukawa 2016). However, as a general matter, the global development community has coalesced around the notion that heavy reliance upon technical assistance impairs aid effectiveness, particularly when it is fragmented and uncoordinated (Berg 1993; Devarajan et al. 2001). This is evident in the Paris Declaration, which calls for donors to “work together to reduce the number of separate, duplicative, missions to the field and diagnostic reviews.”

  25. By contrast, one of the primary objectives of budget support is to buy policy concessions at the agenda-setting stage of the policymaking process (Koeberle et al. 2005; Molenaers et al. 2015). Therefore, the evidence presented in this article can be interpreted as evidence that budget support is achieving one of its intended effects.

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Acknowledgments

We thank Ariel BenYishay, Samantha Custer, Jonathan Pickering, Robin Davies, and Annalisa Prizzon for providing helpful comments on previous drafts of the manuscript. We also thank NORC at the University of Chicago—in particular, Renee Hendley, Kate Hobson, David Kordus, Elise Le, Aparna Ramakrishnan, Alex Rigaux, Bhanuj Soni, and Stacy Stonich—for their survey design and data collection assistance. Additionally, we owe a debt of gratitude to the nearly 6,731 development policymakers and practitioners from 126 countries who participated in the 2014 Reform Efforts Survey. Were it not for their willingness to graciously share their experiences and insights, this study would not have been possible.

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This study was made possible through generous financial support from the John Templeton Foundation and the Smith Richardson Foundation.

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Masaki, T., Parks, B.C., Faust, J. et al. Aid Management, Trust, and Development Policy Influence: New Evidence from a Survey of Public Sector Officials in Low-Income and Middle-Income Countries. St Comp Int Dev 56, 364–383 (2021). https://doi.org/10.1007/s12116-020-09316-3

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