The Conditional Effectiveness of Aid : The Role of Institutional Capacity in Advancing Human Development

Sammanfattning

During the last few decades, the effectiveness of aid has been a subject of extensive debate within the field of development studies. Prior research has lifted the importance of strong institutions in recipient countries as a condition for positive development to come from aid. This study, therefore, aims to research whether the effect of ODA on human development, measured through HDI, varies depending on institutional capacity. The research paper is based on a quantitative analysis of 135 countries during the period 1996-2022, where multiple linear regression models have been used. The hypothesis for the study predicted that states with stronger institutional capacity would be better able to apply received development aid for human development purposes. Results instead suggested that the effect of ODA on HDI in most cases is negative or non-significant, even in countries with high institutional capacity, proving the hypothesis wrong. What is suggested is instead that the effectiveness of aid is much more complex and context-dependent than what was earlier assumed. The outcome of the study highlights the importance of further research on what conditions are most efficient for the effectiveness of aid.