Unbinding Ties: Foreign Aid and the Erosion of Social Trust in Africa

Foreign aid dominates public investment in many African economies, yet its consequences for the social foundations of development remain poorly understood. This paper estimates the causal effect of foreign aid on social trust across 26 African countries. Matching geocoded aid projects from China and the World Bank with Afrobarometer survey data, we exploit supply-side instruments derived from Chinese industrial production inputs and World Bank financial capacity indicators, augmented by a shift-share instrument. We find that proximity to Chinese aid projects reduces social trust by 3.6 percentage points and proximity to World Bank projects by 8.8 percentage points. Both estimates are stable across alternative instruments, distance thresholds, and outcome measures. Mechanism tests show that aid reduces participation in four forms of collective action, and that collective action effects appear rapidly after project completion while trust effects accumulate gradually. The adverse trust effect is significantly attenuated in communities with strong pre-existing collective action, consistent with a social fragility hypothesis. These results imply that aid design which builds rather than replaces community cooperation can preserve the social infrastructure on which long-run development depends. JEL codes: F35, O12, O55, Z13