Foreign Aid and Statehood in Africa

Has foreign aid destroyed state institutions in Africa? African states depend on development assistance to conduct basic government operations, yet few of these states are well governed or effective at providing public goods. The two trends, mounting foreign aid and static or diminishing state performance, raise an obvious question: Is aid dependency contributing to misrule and state failure in Africa? Many critics argue the two phenomena are related. I find they are not. My analysis fails to show a negative association between aid receipts and two measures of democracy and economic freedom. Instead, the evidence is consistent with a small, positive relationship between aid and these indicators of state performance. Since the international community seems bent on reducing foreign aid, an important issue is how African states can maintain and improve their performance with less foreign assistance.