development-outcomes-how-local-actors-matter

Rogla, Jennifer (2017). 'Development Outcomes: How Local Actors Matter' Paper presented at the annual conference of the HDCA, Cape Town 2017.

Abstract

What role have local actors played in the widely hailed development success of Costa Rica? The country has defied the odds. Rottenberg (1993) predicted a decline in aid flows to the country would lead to economic stagnation (Fox 1998). That prediction was wrong. While Costa Rica’s average income was low in the 1960s, the World Bank now classifies it as an upper middle-income country. It is a world leader in terms of environmental policies, the only tropical country to reverse deforestation, and it tripled its GDP per capita since 1960. Regionally, Costa Rica has one of the lowest poverty rates, higher growth rates, top scores on human development measures such as the HDI, and one of the lowest corruption scores. Costa Rica’s achievements have often been attributed to such macro variables as export-led growth and sound state institutions capable of sustaining stable growth (Shafer 1994). Beginning with Costa Rica’s colonial history (Mahoney 2001), another favored development narrative also highlights the emergence over time of a large affluent middle class and strong values supporting democracy and social inclusion (Acemoglu & Robinson 2006). Although these prevailing political economy and institutionalist interpretations offer important insights for understanding Costa Rica’s development success, these accounts do not fully explain its feats. In fact, Costa Rica received USD 4.6 billion in foreign aid from the end of World War II through 1995. Much of it was meant to fund economic development and welfare projects, aid known as official development assistance or ODA (Fox 1998, Paus 2005). The purpose of my proposed project is to understand the role of this USD 4.6 billion in aid on Costa Rican development, and more specifically the role of local actors involved with these development projects.

In order to do this, I argue we must move away from implicit principal-agent conceptions of aid projects, and instead look at aid projects as a team production process. The team production approach, first conceived in economics (Alchian & Demsetz 1972, Holmstrom 1982, Mitchell 1999), can illuminate how local actors assist in overcoming typical problems in development, including collective action, lack of trust, asymmetrical information and weak donor coordination. Imagine an auto factory: a car will not run if the engineer made a defective engine, or if it was installed incorrectly by a line worker. Either way, the outcome is team failure. I argue aid projects require similar teamwork between donors, implementers, and recipient country beneficiaries. As I see it, success is only possible if all links in the implementation chain properly perform their respective role. We are most likely to see country-level improvements when this condition is met. Understanding when actor incentives are aligned allows us to understand when success is more probable. However the aid literature has barely probed how much the inputs of each actor in the chain matter, or what incentives drive their performance. The literature has focused instead on country-level outcomes and tends to assume the donor’s input is the most important variable for achieving aid project success. This tendency overlooks the agency of local actors and the essential role they play in this process, which will allow us to make more accurate macro-level research claims including on human development indicators.

I will draw on Costa Rica’s unique and rich context to explore local actor input. For example, former U.S. Ambassador to Costa Rica, Frank McNeil, illustrates the importance of exploring the relationships between actors in aid project implementation, when he noted: “To the extent U.S. aid worked well, it was due primarily to a collaborative relationship between Costa Rican and U.S. authorities…In my experience elsewhere, in Southeast Asia and Latin America, the recipient’s relationship to donor nations was often less collegial, hence less effective” (Mack & McNeil 2012, 4).

My research question is motivated by a broader puzzle: how do we determine aid effectiveness? After over 50 years of aid effectiveness research, existing literature demonstrates little agreement on how aid has affected recipients. Researchers have discredited seminal macro-level studies such as that by Burnside and Dollar (2000), pointing out the sensitivity of regression models and hidden assumptions that statistical analyses and large-N studies obscure (Easterly, Roodman, & Levine 2004; Bermeo 2016). Contradictory results can be attributed to the many measurement challenges inherent in the study of aid effectiveness: isolating aid as a causal factor in development; conceiving of project impacts as linear; and capturing non-monetized costs, to name just a few (Stiglitz, Sen, Fitoussi 2010; Roodman 2007; Ramalingam 2010). Yet, scholars continue to make macro claims using large-N methods. Aid as a key topic of inquiry remains vitally important, but we are still struggling to measure it. Context-specific research, of the kind I am proposing here, is what this situation demands. A detailed study of Costa Rica’s development “culture” will enable me to identify variables that can be used and compared within other contexts. My goal is to offer a more complete explanation of those factors that have fostered Costa Rica’s unique outcomes as an aid recipient. 

  

This research joins a growing body of development scholarship – in particular human development scholarship – that recognizes the independent causal power of less influential actors like aid recipients, even in interactions with huge power asymmetries. Amartya Sen (1999), for example, has long argued that the purpose of development is to increase individual freedoms, yet our metrics of development aid effectiveness continue to focus on macro inputs to macro outcomes, leaving the micro influences undertheorized. Analyzing the impact of everyday people on development is now essential for understanding macro-level outcomes. My innovative application of the team production lens to the study of aid projects combines approaches within the fields of economics, IR, and human development studies, taking a vital interdisciplinary approach to the study of global problems. 

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