Foreign Aid and the Performance of Bureaucrats

Abstract Although much work examines foreign aid’s impact on development outcomes, its effect on bureaucracies—institutions that are key to development and profoundly influenced by aid interventions—remains understudied. I argue that project aid channeled through recipient governments alters financial and social aspects of work over which bureaucrats hold salient preferences, generating trade-offs that drive bureaucrats to redirect effort from routine work toward donor-funded initiatives. Drawing on interviews, surveys, and experiments with more than 600 Ugandan bureaucrats, I find that despite preferring government funding and autonomy, bureaucrats are drawn to better-paid aid projects, thus diverting effort away from regular duties. They also prefer departments with substantial donor funding even if it undermines the equity and teamwork they value. These findings provide micro-level insights into the unintended consequences of external development assistance: the same incentives that boost performance on discrete donor-funded projects divert effort from government programming and erode organizational cohesion.