This is coauthored work with Ryan Jablonski (London School of Economics) and Brigitte Seim (University of Minnesota).

Fiscal theories of state development emphasise a complementarity between government revenue, taxation, and citizen demands for public services. We assess the relevance of this logic for understanding the political and redistributive consequences of massive cuts to foreign aid budgets following the closure of USAID in 2025. We conduct over 4,500 in-person surveys, survey experiments and interviews with citizens and bureaucrats before and after the cancellation of USAID contracts in Malawi, one of the world’s most impoverished and aid-dependent countries. Focusing especially on public health, we document three emerging trends. First, the effects of cuts on health provision and morbidity are large and unequal, with impacts felt most among those in extreme poverty. Second, politicians and local service providers are often blamed for declining relations with donors and corresponding cuts to services. However, this varies significantly by partisan affiliation, and we document little evidence of changing sentiment towards the USA. Third, we document high, but heterogeneous, demand for the government to replace cancelled health services through taxation, particularly when respondents are experimentally assigned more information about aid cuts or presented with tangible policy trade-offs. Consistent with theory, we conclude that the aid shock is changing expectations of the state by increasing inequality and shifting demand for progressive and redistributive social policy, especially among the poorest.