Mechanisms of the ‘Aid Curse’: Lessons from South Korea and Pakistan

Monica Prasad*, Andre Nickow

*Corresponding author for this work

Research output: Contribution to journalArticle

3 Scopus citations

Abstract

Recently scholars have argued that, far from contributing to development, foreign aid hinders development. But in the 1960s the East Asian countries developed rapidly despite receiving large amounts of aid. To examine why aid seems to undermine development in some cases but not in others, we conduct a detailed comparison of the mechanisms of the ‘aid curse’ in South Korea and Pakistan. We show that South Korea saw astonishing levels of corruption, but this did not hinder its development; and Pakistan had a strong bureaucracy, which did not help it to grow. The key difference between the two countries was in the strength of their tax systems: foreign aid in the context of underdeveloped tax administration leads to increasing cycles of debt that undermine development. When foreign aid arrives in the context of commitment to strong taxation, a country can avoid the ‘aid curse.’

Original languageEnglish (US)
Pages (from-to)1612-1627
Number of pages16
JournalJournal of Development Studies
Volume52
Issue number11
DOIs
Publication statusPublished - Nov 1 2016

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ASJC Scopus subject areas

  • Development

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