Foreign donors with substantial ground operations in war-torn countries face a fundamental dilemma: reconstruction, state-building, and late development can be a politically costly process, and occasionally aid recipients have access to sufficiently large amounts of foreign aid that they can “buy” institutions rather than creating or re-building them from local resources. In these cases, donor-supported "parallel institutions" perform the essential functions on the state in specific sectors, thereby relieving recipient governments from developing their own institutions, domestic revenue sources, and expertise. This paper examines the nature of U.S.-financed parallel institutions in post-war Iraq and South Korea. In Iraq, U.S. advisers continue to staff key ministries at the national level, while U.S. military units and Provincial Reconstruction Teams provide decentralized infrastructure supported by new, American-backed provincial councils. Alternatively, in postwar South Korea, the state gradually assumed responsibility for planning, financing, and implementing infrastructure projects, as well as assimilating pilot planning agencies originally housed within the U.S. aid program. This paper also explains how political factors affected the longevity of parallel institutions in both cases. Why does Iraq continue to depend on parallel institutions at all levels of government while South Korea eventually assumed responsibility for its own institutions? First, parallel institutions at the national level are more durable when leaders rely on state-based patronage to stay in power. Second, parallel institutions at the local level are more durable where national leaders do not decentralize resources and authority to local governments. In Iraq, the presence of U.S.-backed parallel institutions at the national and provincial levels allows leaders to bypass politically painful reforms, such as imposing meritocratic employment schemes; they also allow sectarian groups embedded at the national level to preclude the rise of rival sects at the local level. American parallel institutions were short-lived in South Korea because appointment and promotion in the civil service was meritocratic and competitive salaries could be financed through domestic revenue sources; there was also little fear of rival power centers arising in local government, with the landlord class destroyed by land reform and no ethnic conflict to speak of.