ABSTRACT
This chapter covers governance effects. Unintended governance effects occur when external interventions unintentionally influence the quality and reach of institutions at any level in the recipient country. This chapter covers three kinds of governance effects: corruption effects, democracy effects, and tax effects. Corruption effects occur when the external intervention provides extra means for the elite for embezzlement and reduces possibilities for citizens to put a check on that. Democracy effects occur when leaders of a country use the foreign aid to bolster their own grip on power and undermine democracy. Tax effects occur when the arrival of foreign funds reduces (or increases) incentives for the recipient government to mobilize domestic resources.
