Aid Scores 2006. Source: Center for Global Development.
Norway and Denmark have the highest scores and give most aid as a share of GDP. Is that good?
In Kenya recently the opposition protested against the resumption of aid to the government, because it would make the government less dependent on parliament and weaken the fight against corruption.
This fits nicely with the model by Bueno de Mesquita et al. described in this post. Aid can do harm by enabling an autocrat to pay off a small winning coalition.
Aid can sometimes do some good, but we don’t really know how much harm aid does. It is probably substantial. I haven’t seen any studies of the iatrogenic effects of foreign aid. There is certainly no solid evidence for a positive effect of aid on economic growth, the opposite seems to be the case.
Source: William Easterly
Of course, it could be argued that there is selection bias so that the poorest and worst managed countries with the lowest growth get the most aid. Note, however, that the graph covers 42 years. If aid worked there should have been more growth in the countries with the highest aid.
Denmark and Norway may be the countries that do relatively most harm with aid. We just don’t know. No industry shows any great inclination towards external evaluations of its harmful effects. The aid industry is no different.