Foreign Aid and Government Legitimacy

Branding of foreign aid may undermine government legitimacy in developing countries when citizens see social services being provided by external actors. We run a survey experiment on a sample of Indian respondents. All subjects learn about an HIV/AIDS program; treated subjects learn that it was foreign-funded. Although the results are not statistically significant at conventional levels, the patterns in the data suggest that approval ratings for key government institutions are lower in the treatment conditions while assessments of government performance are higher. These contrasting effects point toward the multiple ways in which government legitimacy might be affected by the presence of foreign aid: political representatives might suffer reputational loss, while overall state legitimacy remains unchanged