Bypassing the Incumbent: Leadership Tenure and Foreign Aid Channels

Abstract

AbstractThe traditional perception is that foreign aid provides leaders in recipient states access to nontax revenue, which incumbents may be able to manipulate in order to provide public or private goods as is required to maintain office. Recognizing this possibility, donors have been shifting away from direct government-to-government aid and toward bypass aid, administered by NGOs and civil society groups rather than the regime directly. Receiving aid through alternative channels is designed to increase aid’s effectiveness, yet it has potential implications for incumbent leaders who may have less ability to manipulate aid receipts to their benefit. In this paper, we argue that bypass aid should negatively affect leaders’ tenure, conditional on the political institutions in place. Using data on bypass aid from 2004 to 2017, we find evidence of a punishing effect and conclude that bypass aid is a particularly acute problem for leaders in authoritarian regimes. The findings imply that efficiency and stability may present a tradeoff for potential donors and that bypass aid may not be the panacea of the aid effectiveness movement.