Competition or Chaos? Donor Fragmentation and the Politics of Aid Effectiveness

Foreign aid fragmentation—where multiple donors operate largely independently in the same region or sector—has long been criticized for undermining economic development in recipient countries. Extant research highlights how uncoordinated donors lead to high transaction costs, project duplication, and an overburdened bureaucracy \citep{Acharyaetal_2006}; \citep{knack_donor_2007}. Indeed, a number of empirical findings link aid fragmentation to weaker institutions, increased corruption, and reduced economic growth \citep{knack_donor_2007};. Yet, more recent research suggests that fragmentation can, under certain circumstances, foster positive impacts on recipient countries. By expanding the “marketplace of ideas,” fragmentation increases competition between donors, driving innovation which can offer recipient governments more choice and minimizes dependence on any single donor. This project seeks to understand the conditions under which fragmentation leads to competition and innovation, rather than chaos and inefficiency. Our main theory is when the subnational governmenmt is more effecitve and has more capacity, fragmentation will lead to postive returns.

We leverage Afrobarometer data to test the empirical implications of our argument. We analyze sub-Saharan Africa over the period 2000-2015. We focus specifically on 13: Benin, Botswana, Ghana, Madagascar, Mali, Mozambique, Malawi, Namibia, Senegal, Tanzania, South Africa, Zambia, and Zimbabwe. While we hope to eventually test our assumptions over various regions and time periods, we begin here as these 13 countries have data across 4 waves of Afrobarometer which lets us leverage the temporal variation in subnational governance for these countries.