The Impact of NGO-Provided Aid on Government Capacity: Evidence from Uganda

This paper investigates whether NGO-provided basic healthcare crowds out or crowds in similar services provided by the government in rural Uganda. We find that NGO entry reduces the number of government workers, which leads to a reduction in government-provided health services. The results are driven by the NGO often hiring the government worker in places where skilled labor is scarce. In places where skilled labor is relatively abundant, the NGO hires a second person and complements government healthcare. Thus, the effects of NGO entry on government capacity are nuanced. (JEL: O02, J01)

Keywords: Aid efficacy, Government capacity, Labor crowd out, Skilled labor scarcity.