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‘How Foreign Aid Crowds out Public Spending: Evidence from an Experiment in Malawi’ – Ryan Jablonski (The London School of Economics and Political Science)

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NICEP is delighted to be inviting Ryan Jablonski (The London School of Economics and Political Science) to deliver a talk entitled ‘How Foreign Aid Crowds out Public Spending: Evidence from an Experiment in Malawi’ for the Autumn schedule of its seminar series.

Abstract

Does foreign aid crowd out public spending? One of the most frequent criticisms of foreign aid is that aid will cause government to reallocate public funds. If so, donor efforts to target particular sectors or communities for development may be in vain. Moreover, the crowding out of funding may make the very poorest communities in society dependent upon donors for development rather than governments, contributing to a low accountability equilibrium. Additionally, the crowding out of public funds may free up resources for governments to spend on political patronage or corruption. While such claims are often made, much disagreement exist about the scale of these effects, and their impact on development. We conducted a field experiment in Malawi in which we provided information to 460 local councillors and MPs about donor funded projects in schools within their wards and constituencies. We then asked these politicians to make real and meaningful decisions about the allocation of education goods to these same schools. When politicians received information about an existing aid project, they were 18% less likely to target additional goods to that school; and these effects increase to 22-29% among politicians for whom this information was plausibly novel. This crowding out does not significantly increase the amount of funds given to family member’s schools, less needy schools, or school in areas that voted strongly for the incumbent.

Date/Time
Date(s) - 14 Nov 2019
12:00 am - 1:00 pm

Location
C10, Teaching & Learning Building