The Capacity for Bypass: State Capacity and Foreign Aid Delivery Tactics

• In Event: Complexities of International Cooperation and Law

Abstract

What explains donor states' decision to bypass recipient governments in foreign aid allocation? While previous research on aid modality has focused on governance (Dietrich 2013), here we highlight a related but distinct characteristic of recipients -- state capacity. The broader aid literature (Young and Padilla 2019; Ahmed 2020) suggests that a recipient's ability to effectively utilize aid is driven by state capacity, yet we know little about how state capacity factors into donors' preference for different aid modalities. In this paper we examine the relationship between a host of capacity indictors and the percentage of aid awarded to recipient states through bypass channels. Preliminary analysis shows a unique and independent relationship between state capacity and bypass, even when controlling for quality of governance and corruption. We also probe heterogeneous effects to understand how major and minor powers factor recipient capacity into their aid allocations differently. These findings speak to donors' concerns for efficiency and the limits of the good governance movement.

Authors

• Susan H. Allen, University of Mississippi

• Lauren Elizabeth Ferry, University of Mississippi

• Obaida Shammama, University of Mississippi