Aid Management, Trust, and Development Policy Influence

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 1,000 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.

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