There are indeed indications that the relationship between aid absorption and local policy climate in low-income areas has been changing somewhat over time—although not necessarily in the expected directions…
Beyond Policy Climate: Other Possible Criteria and Attendant Indicators For Measuring Aid Effectiveness
(regions listed in descending order of overall performance)
East Asia & Pacific
Did the policy climate in recipient low-income areas improve between 1984 and 2002? Very clearly, yes—improvement was marked and general.
Did aid “selectivity” and aid “effectiveness” contribute positively to this outcome? The answer to this question is not at all self-evident.
For low-income, aid-receiving areas as a whole, trends were generally positive for economic performance (up), living standards (up), and structural aid dependence (down).
But performance “story lines” varied tremendously between regions—with the most heavily aid-dependent areas characterized by measured stagnation, or retrogression, in economic performance and living standards.
How to explain the striking negative association among regions between high aid levels and poor trends in economic performance and living standards: Measurement error? “Neighborhood effects”? Independent influence of structural aid dependence? Some combination? Other factors?
Perhaps surprisingly, markedly different performance records for highly “political” aid in different settings: the “story line” for Russia looks rather disappointing, while the “story line” appears more promising.