ABSTRACT
Scholars have different views on the impacts of aid. One group of scholars argues that aid has negative political effects similar to those of oil revenue and that aid reduces government accountability. The second group of scholars argues that aid is different from oil revenue and that its impacts are therefore distinguished from those of oil revenue. This chapter attempts to assess these two schools of thought on aid impacts and explores the causal mechanism that can explain the aid effects. The chapter concludes that the relationship between aid and state building is complex. Aid can thus have positive and negative effects that depend on the aid recipient’s state capacity, aid modality, policy choices and pre-existing socio-political and economic conditions. This chapter provides the conceptual framework for analysis of the effects of different income sources on state building before 9/11 and of foreign aid after 9/11 in Afghanistan in the proceeding chapters.
