Khan, QaiserFaguet, Jean-PaulAmbel, Alemayehu2015-12-222015-12-222015-12https://hdl.handle.net/10986/23475Donors increasingly fund interventions to counteract inequality in developing countries, where they fear it can foment instability and undermine nation-building efforts. To succeed, aid relies on the principle of upward accountability to donors. But federalism shifts the accountability of subnational officials downward to regional and local voters. What happens when aid agencies fund anti-inequality programs in federal countries? Does federalism undermine aid? Does aid undermine federalism? Or can the political and fiscal relations that define a federal system resolve the contradiction internally? This study explores this paradox via the Promotion of Basic Services program in Ethiopia, the largest donor-financed investment program in the world. Using an original panel database comprising the universe of Ethiopian woredas (districts), the study finds that horizontal (geographic) inequality decreased substantially. Donor-financed block grants to woredas increased the availability of primary education and health care services in the bottom 20 percent of woredas. Weaker evidence from household surveys suggests that vertical inequality across wealth groups (within woredas) also declined, implying that individuals from the poorest households benefit disproportionately from increasing access to and utilization of such services. The evidence suggests that by combining strong upward accountability over public investment with extensive citizen engagement on local issues, Ethiopia’s federal system resolves the instrumental dissonance posed by aid-funded programs to combat inequality in a federation.en-USCC BY 3.0 IGOSANITATIONPUBLIC OFFICIALSBASIC SERVICESECONOMIC GROWTHCONTRACEPTIONSKILLED HEALTH PERSONNELPOLITICSCIVIL SERVANTSINFORMATION SYSTEMANTENATAL CARELAWSGOVERNMENTLOCAL GOVERNMENTSSTRATEGIESPOLITICIANSETHNIC GROUPSSERVICESFEDERAL GOVERNMENTSDEVELOPING COUNTRIESPUBLIC SERVICESHEALTH CAREGENDER PARITYPOLICY DISCUSSIONSSOCIETAL GOALSNATIONAL GOVERNMENTSPOLITICAL LEADERSHIPDEVELOPMENT GOALSSECONDARY ENROLMENTCORRUPTIONSUSTAINABLE DEVELOPMENTNATIONAL LEVELRURAL POPULATIONPUBLIC HEALTHTELEVISIONKNOWLEDGEMILITARY REGIMEPUBLIC POLICYLABOR MARKETSOCIAL IMPACTMINISTRY OF HEALTHCOLLUSIONGRASS-ROOTSINCOME INEQUALITYDEVELOPMENT STRATEGIESDEMOCRACYCITIZENHEALTH CARE SERVICESVIOLENCEMODERNIZATIONORGANIZATIONSCHRONIC POVERTYHOUSEHOLD SURVEYSSERVICE PROVISIONMORTALITY RATECULTURAL CHANGEPRIMARY SCHOOLGRASS- ROOTSSERVICE DELIVERYPLACE OF RESIDENCESTATE UNIVERSITYSOCIAL DEVELOPMENTMORTALITYRADIOMODERN CONTRACEPTIVE METHODSRESPECTPROGRESSGENDER PARITY INDEXHOUSEHOLD LEVELINITIATIVESHUMAN CAPITALINTEGRITYINVESTMENT IN EDUCATIONMOTHER TONGUESRURAL COMMUNITIESACCOUNTABILITYSOCIAL SECTORPOLICIESTRANSPARENCYDISCRETIONMODERN CONTRACEPTIVE USEMATERNAL HEALTH SERVICESSCHOOL ATTENDANCEPOLICY RESEARCH WORKING PAPERPOLICY MAKERSBANKNATIONAL GOVERNMENTCOLLAPSEPRIMARY SCHOOL AGEBASIC INFRASTRUCTUREANTI-CORRUPTIONURBAN AREASSKILLED BIRTH ATTENDANTSCONTRACEPTIVE ACCEPTANCESKILLED BIRTH ATTENDANCEGRAFTPOLITICAL PARTYFEDERAL GOVERNMENTSERVICE QUALITYSOCIOECONOMIC FACTORSMOTHERPOLICYCITIZENSPOLITICAL PARTIESCONTRACEPTIVE USEDEMOCRACIESCHILD MORTALITYGOVERNANCEHUMAN RIGHTSRECIPIENT COUNTRIESMATERNAL HEALTHETHICSCITIZENSHIPPUBLIC HEALTH SERVICESWARSCOMPLAINTSLOCAL COMMUNITIESWARMODERN CONTRACEPTIONNATURAL RESOURCEORGANIZATIONPATRONAGECONTRACEPTIVE METHODSRURAL AREASNUMBER OF CHILDRENRULING PARTYREPRESSIONBASIC SERVICEHUMAN WELFARESOCIAL COHESIONPOPULATIONLAWSTUDENTSPRACTITIONERSLEADERSHIPMARRIED WOMENPOLICY RESEARCHSTRATEGYPRIMARY EDUCATIONWOMENPUBLIC SERVICEGOVERNMENTSMILLENNIUM DEVELOPMENT GOALSHUMAN SETTLEMENTSPOLITICAL LEADERSHEALTH SERVICESOFFICIAL POLICYSERVICEPOLITICAL INSTABILITYRURAL WELFARESKILLED ATTENDANTSSERVICE PROVIDERSSCHOOL AGEDEVELOPMENT POLICYHUMAN DEVELOPMENTWorking PaperWorld Bank10.1596/1813-9450-7511