Foreign Aid and the Culture of Contracting

Christopher Coyne and Claudia R Williamson ()
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Claudia R Williamson: Department of Finance and Economics, Mississippi State University, Box 9580, 312 F McCool Hall, Mississippi State, Mississippi, 39762-9580, USA.
Authors registered in the RePEc Author Service: Claudia Williamson Kramer

Eastern Economic Journal, 2015, vol. 41, issue 1, 102-125

Abstract: We analyze the relationship between foreign aid and the “culture of contracting.” Contracting culture refers to cultural characteristics — trust, respect, level of self-determination, and level of obedience — which allow for impersonal exchange. Theoretically, aid may affect the culture of contracting for better or worse. We empirically analyze this possibility and find that aid generates negative effects on the culture of contracting. The less aid a country receives, the more likely it is to possess a stronger contracting culture. We view our results as identifying another potential unintended consequence of foreign intervention where aid undermines development potential instead of facilitating it.

Date: 2015
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