Does Aid Improve Governance in Developing Countries? Different Effects by Multi-Dimensional Governance

Abstract

This paper examines whether aid to developing countries has achieved the policy goals of international development, which have tended to place considerable emphasis on the improvement of governance in developing countries. Previous studies have explored this issue by conceptualizing governance in terms of one aspect of by conducting micro-level case studies. In contrast, in this paper we try to analyze the effect of aid on governance by suggesting a new conceptual framework that defines governance as made up of three parts-political, administrative, and judicial sectors. Then we analyze the effects of aid on these three sectors at macro level using a panel analysis of 90 developing countries over the 10-year period from 2002 to 2011. We found that aid helped improve political and administrative governance but not judicial governance. Based on our results, we suggest that strategies for governance improvement need to focus on public administration, since this appears to be the sector that is most amenable to reform. In addition, considering that judicial reform requires a long-term outlook to accumulate social trust, we need to put more effort into genuinely understanding the context of developing countries and into promoting reform based on their unique historical and cultural backgrounds as well as their political and socioeconomic circumstances.