Institutional Politics of Development: Organizational Design & Aid Effectiveness

• In Event: Foreign Aid and Financing: New forms and New Uses

Abstract

International development theories and practices have undergone substantial change over the past two decades, particularly those related to improving the effectiveness of foreign aid. These changes have been driven in part by the rise of powerful nonstate donors with innovative financing models and transparency demands, and by recipient-turned-donor states like China which challenge traditional Western aid models and compete directly with long-established donors. Because of these pressures on donors, practices are quickly shifting attention towards local actors – much faster than the generation of theories to explain this shift. Theories of aid effectiveness still center around macro-level variables and outcomes.

In contrast, my research analyzes those micro-level variables that shape aid project outcomes in a targeted country. A major gap in the literature is understanding the role of local aid beneficiaries when exploring the conditions under which aid is effective. Are local actors decisive in project outcomes, and if so, why? What are their roles within projects, and how are they organized? Ostrom (2010) cites the need for more academic research on building institutions through international development work and foreign aid to inform better policy. The differing institutional structures between countries may have a large impact on development aid outcomes, because the institutions and the organizations that enforce them are often charged with implementing individual aid projects. Institutions and the organizations that enforce them are created and staffed by local actors, making this a key area for developing our understanding of local actor roles in aid effectiveness and the effect of recipient country’s organizational design.

These puzzles motivate my initial theory: local actor ‘buy-in’ is necessary to achieve the changes targeted in foreign-funded development projects; moreover, the type of incentives offered to induce buy-in relate directly to the sustainability of project outcomes. As one cannot talk about incentives without discussing the institutions and organizations that generate them, I expect the way that local actors are organized within countries to be a key variable in project effectiveness. For example, I am currently conducting field research on the implementation and long-term outcomes of four foreign aid projects executed between 1990-2011 in Costa Rica. Representing a variety of sectors, donors, and initiation approaches, I am studying the relationship between the incentives used for the buy-in of local actors and the outcomes of these aid projects. The 1987 Central American Peace Accords gave rise to a strong civil society in Costa Rica with many community-level organizations, i.e. producers, women’s cooperatives, and tourism for development associations. These groups tend to interact with national and international organizations to implement foreign funding on development projects, and I argue that the strength of these cooperative interactions between these organizations and the social incentives such relationships create has fostered an environment for more sustainable project outcomes, which has in turn led to notable development progress on the aggregate level.

My approach to understanding aid effectiveness is to: disaggregate the institutional aspects of a project in order to properly measure the impacts; analyze project implementation through an organizational lens; and, identify the kinds of local actor incentives that feed into lasting project changes. Although my theory of local actor buy-in is being generated inductively, I will use it to deductively test projects in two additional countries comparable to Costa Rica’s trajectory of economic development: Malaysia and Mauritius. I will present data on the organizational design of each of these countries in relationship to their development outcomes. This endeavor will allow us to better understand the conditions under which aid is effective in the long-term, and give us a way to conceptualize and operationalize aid effectiveness beyond macro-measures.

Author

• Jennifer Rogla, University of Southern California