end of period (2001) value minus the initial (1982 for most countries, and 1984 for most others) value.<sup>16</sup> Control variables include aid levels, the initial level of bureaucratic quality, the length of the interval over which ICRG data are available for each country, population growth, and per capita income growth.<sup>17</sup> Aid intensity—measured by official development assistance (ODA) as a percentage of GNI, averaged over 1982–2000—may affect bureaucratic quality independently of the fragmentation of aid among donors.<sup>18</sup> Aid could be a source of revenue used to increase public sector salaries, attracting and retaining more talented and experienced civil servants. It could also be delivered in the form of technical assistance designed to increase administrative capacity. High aid levels can undermine public sector institutions, however (e.g., Brautigam 2000). Leaders with short time horizons will face little incentive to use aid to build a capable bureaucracy (Clague et al. 1996), but instead may use aid for patronage purposes—for example by subsidizing employment in the public sector and in state-operated enterprises—to tighten their grip on power. As rents available to those controlling the government increase when aid levels are higher, resources devoted to obtaining political influence increase.<sup>19</sup> Workers face incentives to reallocate time away from acquiring productive knowledge and skills, toward gaining the knowledge and skills useful for obtaining a share of aid revenues. Talent is reallocated from productive to redistributive activities. By making control of the government a more valuable prize, aid can even increase political instability (Grossman 1992). Maren (1997) blames Somalia’s civil wars on competition for control of large-scale food aid. The net effect of aid on bureaucratic quality is therefore ambiguous.

Inclusion of the initial level of bureaucratic quality captures regression-to-themean effects, and controls for the limited opportunity of highly rated countries to increase their scores (the ICRG measure of bureaucratic quality has an upper bound of 6). If there are economies or diseconomies of scale in establishing effective institutions, population increases could improve or worsen bureaucratic quality.<sup>20</sup> The length of the period 16 Annual variation in the data is not used because effects on bureaucratic quality may show up only with substantial lags.

17 The approach here is analogous to the case of growth regressions (and controlling for initial income), in contrast to income levels accounting. Aid/GNI, population and income data are taken from the World Development Indicators.

18 Correlations between donor fragmentation and aid intensity over 1982-2000 are below .10. Note that fragmentation does not necessarily rise with aid levels: doubling all donors’ aid while keeping the number of donors unchanged leaves fragmentation values unchanged.

19 Corruption and aid can be mutually reinforcing, as elites “whose livelihoods depend mostly on aid...become an interest group that will fight for continued aid...to ensure themselves continued privileges and income” (Degnbol-Martinussen and Engberg-Pedersen 1999: 273).

20 Knack and Azfar (2003) critically review the various arguments for economies and diseconomies of scale in governance, and show that cross-sectional evidence indicating larger countries are more corrupt is 17