Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations

aid, growth, policy, selectivity, poverty reduction, post-conflict, democracy, political stability, economic vulnerability

MODELLING AID ALLOCATION: ISSUES, APPROACHES AND RESULTS

There is a widespread view that political criteria have received less emphasis in aid allocation since the end of the cold war, with a greater share of aid subsequently being based on developmental criteria. An observed increase in aid effectiveness is attributed to this shift. A reasonably large literature on aid allocation supports this view: a number of influential, widely cited studies conclude that developmental criteria played no role in the 1970s and 1980s inter-recipient aid allocation. This paper argues that the shift is not as significant as commonly thought. It points to a number of methodological weaknesses in the dominant modelling approach used within the literature, showing that more rigorous econometric methods suggest that developmental criteria have had a larger influence on cold war period aid allocation than previously thought. An alternative interpretation of the observed increase in aid effectiveness is provided.Aid Allocation, Donor Interest, Recipient Need, Tobit Models, Regression

Descriptive and Prescriptive Analyses of Aid Allocation: Approaches, Issues and Consequences

aid allocation, relative needs, per capita income, performance index, poverty

Modelling Aid Allocation: Issues, Approaches and Results

aid allocation, donor interest, recipient need, Tobit models, regression

Aid Allocation and Fragile States

This paper summarises research on aid allocation and effectiveness, highlighting the current findings of recent research on aid allocation to fragile states. Fragile states are defined by the donor community as those with either critically poor policies or poorly performing institutions, or both. The paper examines the research findings in the broader context of research and analysis on how aid should and is being allocated across all developing countries. Various aid allocation models and their implications for aid to fragile states are considered. The paper also looks at types of instruments and their sequencing in fragile states.aid, fragile states, volatility, growth, poverty, MDGs

Aid, Public Sector Fiscal Behaviour and Developing Country Debt

aid, borrowing, debt, fiscal behaviour

Aid and Public Sector Fiscal Behaviour in Failing States

This paper looks at interactions between foreign aid and the public sector in developing countries, especially those considered to be fragile or failing states. A model is proposed which employs actual budgetary appropriations and revenue estimates (rather than estimated target variables) and allows for asymmetric preference. Variants of the model are estimated using time-series data for Papua New Guinea (PNG). PNG is classified as a fragile state by the international community owing to perceived policy and institutional inadequacies. Results obtained suggest that foreign aid increases consumption and investment expenditures and decreases tax revenues and the level of borrowing.Foreign aid, taxes, public spending, fungibility, fragile states, failing states, Papua New Guinea

Fiscal Effects of Aid

Fiscal policy, Aid, Sub-Saharan Africa

Aid, Conflict and Human Development

A large and growing literature addresses the impact of foreign aid on the growth of per capita incomes in recipient countries. While this link is important, given its implications for poverty reduction, an arguably more important link is that between aid and human development, broadly defined. This paper looks at the impact of aid on the Human Development Index (HDI), the best known and most widely used composite measure of national human development achievement. The paper is particularly interested in the impact of conflict on human development and in links between conflict, aid and human development. These relationships are examined in an econometric analysis of 2001 HDI levels in a sample of 94 developing countries. Twenty-six of these countries are conflict-affected. A number of interesting results emerge, many of which are in stark contrast with those reported in the aid-growth literature. The main findings of this analysis are that conflict and aid are negatively associated with HDI levels, and therefore, that aid does not offset the negative impact of conflict on human development. The second of these findings is puzzling, to the extent that it is inconsistent with most findings in the aid effectiveness literature. The paper also finds that aid is neither more nor less effective, in terms of its impact on human development, in conflict scenariosAid, Conflict, Human Development, Human Development Index.

Aid and Growth in Fragile States

The literature on aid has come a long way in recent years, and as a result we now know much more about aid effectiveness than possibly ever before. But significant gaps in knowledge remain. One such gap is the effectiveness of aid in the so-called ?fragile states?, countries with critically low policy and institutional performance ratings. The current paper addresses this void by examining possible links between aid and economic growth in fragile states. It finds that: (i) growth would have been 1.4 percentage points lower in highly fragile states in the absence of aid to them, compared to 2.5 percentage points in other countries; (ii) highly fragile states from a per capita income growth perspective can only efficiently absorb approximately one-third of the amounts of aid that other countries can, and; (iii) while from the same perspective most fragile states are under-aided, to the extent that they could efficiently absorb greater amounts of aid than they currently receive, many of the highly fragile states are substantially over-aided in this sense. The overall conclusion is that donors need to look very closely at their aid to the sub-set of fragile states deemed in this paper as highly fragile.foreign aid, economic growth, fragile states, policies, absorptive capacity