From The White Man's Burden:
There is another aspect to both the Burnside-Dollar and CRB studies that aid agencies and advocates have chosen to emphasize much less. To the extent that they found any growth effect at all, both Burnside-Dollar and CRB found that the larger the aid already was, the smaller was the additional growth benefit from the additional injection of aid. In the CRB study, their category of aid had a zero effect on growth when it reached 8 percent of the recipient's GDP, and after that the additional aid had a negative effect on growth.Interesting. Looks like foreign aid up to 8% helps out, but then over 8% it actually has a negative impact.
I wonder if once aid gets over a certain level, the leaders of these countries figure they can get more money by trying to impress the aid giving countries rather than trying to tax their own people. They become more responsive to the needs of the foreign countries than to their own people. To get more revenue through taxes, the leaders would have to improve their own economies, and this might require making decisions that are politically unpopular in the short run.