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date: 24 May 2022

Abstract and Keywords

This chapter reviews the aid effectiveness literature to assess whether foreign aid given to areas of limited statehood (ALS) can be expected to promote economic and social outcomes in the recipient country. It distinguishes between different types of aid, motives for granting it, recipient country policies and characteristics, and the modalities by which aid is delivered, as these factors have been argued to influence its effectiveness. This chapter then compares these properties between recipients most affected by limited statehood and those least affected. This allows us to assess the relative effectiveness of aid in countries with ALS. We conclude that on average aid given there is less likely to be effective than elsewhere. As countries with ALS, however, constitute a heterogeneous group, the specifics of individual countries and the types of aid given matter.

Keywords: foreign aid, aid effectiveness, economic development, limited statehood, fragile states, institutions

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