Assessing the impact of aid on public health expenditure in aid recipient countries

Summary Motivation The relationship between aid flows and recipients' spending on health is an important component of the ongoing attempt to measure and improve aid effectiveness. Purpose This article aims to reveal complex interactions occurring between donors, who use surveillance and monitoring to ensure that their aid is effective, and recipients who are pursuing individual political survival in conjunction with national development. Methods and approach This study applies a fixed‐effects model to a dataset of 111 aid recipients from 2000–2018. Findings This study finds that the impact of democracy, government effectiveness, and political stability on public health spending declines as more aid is introduced. Policy implications The findings suggest that aid could lead to reductions in health expenditure when the donor community’s surveillance focuses more on risky or untrustworthy recipients and indirectly creates incentives for good recipients to divert funding away from the health sector.