Aid Fragmentation and Corruption

Effectiveness of development aid is widely perceived to suffer in the presence of multiple donors with overlapping responsibilities. We test existing theory on aid fragmentation by studying aid provision under numerous donors throughout Afghanistan from 2006-2009. Leveraging granular military data on aid, conflict, corruption, and public opinion, we conduct the first micro-level analysis of aid fragmentation. When delivered by a single donor, aid reduces conflict, curtails corruption, and boosts public opinion. But under donor fragmentation, the benefits of aid are significantly reduced. We are able to distinguish among various causal pathways underlying these heterogeneous effects. Our findings are robust to accounting for a battery of novel observable confounding factors as well as a computational bounding exercise used to assess potential bias arising from unobserved factors. Our evidence suggests fragmentation facilitates corruption and erodes the ability of development aid to win ‘hearts and minds' in the fight against insurgents. This study yields potentially actionable insights about improving government policy and public welfare outcomes in fragile and weakly institutionalized settings