The (un)intended Effects of Regulatory Burden on Policy Effectiveness: The Case of Regulations Targeting NGOs

Existing studies see foreign donors as (a) brokers between sustainable development goals (SDGs) and aid-recipient countries’ needs, or (b) intruders into aid-recipient countries’ internal affairs. The intruder view has triggered regulations of NGOs (nongovernmental organizations) in aid-recipient countries. However, little is known, empirically, about how foreign donors respond to regulatory burden. We suggest regulatory burden adds uncertainty and turbulence to the operating context, negatively affecting government effectiveness in securing aid. This negative effect is moderated by the number of foreign donors operating in a jurisdiction. Propositions are tested in a data set derived from the 221 Ecuadorian municipalities during 2007-2018. Findings suggest regulations of NGOs have decreased municipalities’ ability to secure international cooperation. This negative effect is larger in municipalities with a higher presence of donor supply. These results encourage policy makers to consider counterproductive costs of overregulating foreign NGOs and other civil society organizations when designing regulatory tools.