Effective Development Aid: Selectivity, Proliferation and Fragmentation, and the Growth Impact of Development Assistance

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, the Asian Development Bank (ADB), its Board of Directors, or the governments they represent, or the views of the ADB or its member countries, ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, Japan AbstractThis paper examines several indicators of effective development aid, focusing on the contributions of major bilateral donors. The empirical analyses of selectivity for effective aid delivery revealed that, taking a long-term and regional perspective, some major donors including Japan have been as selective in delivering their aid as some countries well-known for their selective aid delivery, such as Denmark. Japan has provided higher aid for the countries with better policy and governance, and higher grant aid for the countries with lower income, particularly in Sub-Saharan Africa. Indexes for donor proliferation and aid fragmentation, which measure increased transaction costs of recipient countries, were calculated using methods set out in existing studies on the topic, but over the longer term and by region. It is demonstrated that aid from some major donors in Asia, the Pacific, and Europe, including Japan, has proliferated less than the aid programs of most other countries.Official Development Assistance (ODA) provided by Japan since 1990 has been more closely correlated with the growth of GDP per capita of recipient countries than that of other donors. The growth acceleration effects of short-impact aid (SIA) such as aid for infrastructure have been stronger than those of other categories of aid such as aid for education, aid for health, or humanitarian emergency aid. While oth...

Do Performance Measures of Donors' Aid Allocation Underperform?

“…In future, donors would not need to claim that a poor judgement of their performance was a `certain value judgement’; it could merely point to a competing measure that praised their performance. Indeed, Kihara (, p. 3–4) recently defended Japanese aid using such an argument: ‘some empirical studies, including studies presented here, seem to contradict the findings of the CGD. A number of recent studies have ranked aid donors by various indicators of their aid‐giving and in some of these Japanese aid has been ranked toward the upper end of donor countries’.…”

Aid Fragmentation and Effectiveness for Infant and Child Mortality and Primary School Completion

“…Knack and Rahman (2007) regress the 2001 Bureaucratic Quality ratings of the International Country Risk Guide (ICRG) to explanatory variables such as the project aid fragmentation, the ODA/GDP ratio, population growth, per capita GDP growth, and the share of aid from international organizations and "like-minded" groups to demonstrate that project aid fragmentation has a negative and significant influence on bureaucratic quality. However, Kihara (2012) points out that Knack and Rahman's study (2007) is just a "point" estimate for the 2001 rating. To assess the long-term effect of aid fragmentation, Kihara (2012) uses the Government Effectiveness Index in "Aggregate Governance Indicators" (Kaufmann, Kraay, and Mastruzzi 2008) which offers panel data for 85 countries.…”

“…However, Kihara (2012) points out that Knack and Rahman's study (2007) is just a "point" estimate for the 2001 rating. To assess the long-term effect of aid fragmentation, Kihara (2012) uses the Government Effectiveness Index in "Aggregate Governance Indicators" (Kaufmann, Kraay, and Mastruzzi 2008) which offers panel data for 85 countries. His explanatory variables include the index of project aid fragmentation (the inverse of Herfindahl-Hirschman index), the index of donor proliferation (Theil Index for total ODA), ODA/GNI ratio, GNI per capita, GDP growth rate, population size, multilateral and bilateral aid, and a dummy variable indicating civil wars.…”

“…Much of the existing literature argues that aid fragmentation is in fact happening rapidly, and that this fragmentation imposes a heavy burden and strain on the recipient governments (Cassen 1994, 175;Frot and Santiso 2010;Kharas 2007 etc.). This phenomenon has been termed "recipient fragmentation" (Acharya et al 2006, 8;Kihara 2012), "project proliferation" (Morss 1984, 465;Cassen 1994, 175;Kimura et al 2007Kimura et al , 2012Knack and Rahman 2008 1 ), "fragmentation of aid delivery" (Steinwand 2013), "fragmentation of aid" (Kharas 2007, 5), and "proliferation of aid project" (Roodman 2006a).…”

“…On the other hand, aid fragmentation is sometimes defined as the proliferation of aid by a donor in a given partner country. This phenomenon is called "donor fragmentation" (Bürcky 2011) or "donor proliferation" (Acharya et al 2006;Kihara 2012). The aid fragmentation examined in this paper is not "donor proliferation," but the one described by the OECD Chairman in 2005.…”