# **3. A Review of the Empirical Literature on Aid and Dependency**

The aim of this section is to look at the evidence that may indicate that aid programs can exert some distributional distortions that lead to changes in the labor supply. This is done for two reasons, firstly to show that there is a controversial debate on whether production unrelated cash flows (like pro-vulnerable income transfers, aid or remittances) tend to alter both individual and social decision making, and secondly in order to encourage more empirical research in verifying the theoretical statement developed in this piece of research.

The empirical literature studying the distortions generated by aid is definitely wide. The approaches to reporting this phenomenon are of three types: anecdotal, numerical and empirical. The former reports mainly case studies and views expressed in reports or media: they may be heavily influenced by the reporters’ opinion, though in most cases this represents the most powerful informative tool we can dispose of. The numerical one generally calibrates a model (i.e. computer general equilibrium) with parameters coming from some econometric estimation: it can provide relevant insights, but often leads to results largely dependent on the model’s assumption and analyzed transmission channels. The empirical one, developed through the house-hold survey data analysis can be very powerful, especially if it presents a credible identification strategy.

In support of the distribution distortion channel developed in this paper, some controversial pieces of evidence can be reported. For example, a report by Groupe URD (2005) on Afghanistan, states that some communities did modify their collective behaviors upon receiving external assistance (rising unemployment, public good maintenance suspension). The case of Northern Kenya in 2006 is also explicative: Thilo Thielke (2006) reported in _Der Spiegel_ that after a drought European food aid almost replaced the regional agricultural activity and that in the town of Loiyangalani and surrounding province more than 20,000 people were fed everyday free of charge over a population of roughly 40,000. Niger in 2005 is another case, as the New York Times article stated in “Niger, Hungry Are Fed, but Farmers May Starve” (Burley 2005), the displacement of farmers and the unbalanced disincentives toward seeking free food, rather than working, badly affected Niger, so far that the President Tandja deeply criticized UN aid agencies. Somalia and the establishment of its refugee camps were another controversial case in the 1980s, that may exemplify a dependency transmission channel like the one previously reported. For example, Tucker (1982), a former refugee assistance worker in a Somali camp, reported some statements that anecdotally match the ideas developed in this paper _“men no longer want to return to the tenuous existence of the nomad or dryland farmer, living constantly on the razor’s edge of survival. Whereas they once collected their drinking water from the muddy river, they have now become accustomed to the fresh, clear water provided by diesel pumps and water tankers. Meanwhile their children grow up in the culture of dependency and learn no other way of life”._ 16