The Limits of Foreign Aid Diplomacy: How Bureaucratic Design Shapes Aid Distribution

Abstract

How does the institutional design of a state's bureaucracy affect foreign policy? We argue that institutions can moderate bureaucrats’ incentives to act in accordance with an Executive's diplomatic preferences. Where the Executive can influence budgets or career paths, bureaucrats face incentives to adopt her diplomatic goals as their own. Where agencies are shielded from Executive influence, bureaucrats are free to act independently in a bid to enhance their autonomy and their reputation for competence. To test these expectations, we develop a new measure of bureaucratic independence for the 15 aid‐giving agencies in the US government. We analyze how independence affects foreign aid allocation patterns over the 1999–2010 period. We find that in “dependent” agencies, foreign aid flows track the diplomatic objectives of the president. In “independent” agencies, aid flows appear less responsive to presidential priorities and more responsive to indicators of need in the recipient country. Our results highlight limits on the diplomatic use of foreign aid and emphasize the importance of domestic institutional design. Our findings yield insight into a broad range of policy domains—including international finance, immigration, and the application of economic sanctions—where multiple government agencies are in charge of implementing foreign policy.

Organizational Capacity, Regulatory Review, and the Limits of Political Control

“…That is, presidents struggle to control many agencies and many types of activities. However, the president's ability to exert political control over agencies diminishes the more insulated they are from his control (see, e.g., Arel-Bundock et al, 2015). While the president has many mechanisms to exercise influence over an agency within the EOP, like OIRA, he has many fewer sticks to use with an agency like the Trade and Development Agency, which is located in the Executive branch but is not a Cabinetlevel agency.…”

Donor Political Economies and the Pursuit of Aid Effectiveness

“… 2. Domestic determinants of donor activity include many things: for donor country size, see Bertoli, Cornia, and Manaresi 2008; and Round and Odedokun 2004; for socioeconomic values and welfare institutions, see Lumsdaine 1993; and Therien and Noel 2000, respectively; for public opinion, see Milner 2006; and Paxton and Knack 2012; for political party ideology, see Brech and Potrafke 2014; Milner and Tingley 2011; and Tingley 2010; for budget size and constraints, see Chong and Gradstein 2008; and Frot 2009, respectively; for domestic development NGOs, s|ee Lancaster 2006; and Lundsgaarde 2012; for aid agencies, see Kilby 2011; and Arel-Bundock, Atkinson, and Potter 2015; and for elite perceptions of their country's international role or their ideas about why aid is valuable, see Breuning 1995; and Van der Veen 2011, respectively. See Fuchs, Dreher, and Nunnenkamp 2014, for a recent review of the literature. …”

Domestic Institutional Design and the National Interest in Trade Negotiations

“…However, diplomats and other officials in charge of crafting a country's stances in negotiations are embedded in institutional settings (Allison 1971) located in the interstice of the fluid divide between the domestic and the international levels (Chorev 2007). Such a fact prompts a question: how do distinct institutional designs (Arel-Bundock et al 2015) impact the formation of the national interest in trade negotiations? That is, do differences in the manner state bureaucracies are embedded in the broader social environment and interact with each other explain variance across the national interest of different negotiating parts?…”