aid dispersion measurement in principle and practice summary excessive dispersion of development assistance has been high on the paris agenda on aid effectiveness however there is no agreement in the existing literature on how aid dispersion should be measured and few studies of the extent of the problem we argue for using the theil index for both recipients and donors this relative inequality measure has a major advantage it allows for a perfect decomposition into variation between and within entities exploiting this property we can rank official donors and recipients not only in terms of the total spread but also assess the contributions of geographic and sectoral dispersion we provide a detailed picture of developments along various dimensions globally as well as for countries income groups and regions over 1998 13 we further distinguish between bilateral and multilateral donors consistent with other studies using more limited samples we find little effect of the paris agenda overall aid is more fragmented in sub saharan africa and in the poorest countries globally as well as for most donor and recipient countries between variation is the main driver of the spread lending support to the geographic concentration policies many donor countries have adopted bilateral aid has been somewhat more dispersed than multilateral aid and in both cases the large number of donors controlling similar shares of total funds is a major driver of the total spread the latter suggests that concentration could also be achieved through a reduction of the number of actors on the donor side of the aid industry a perspective that previous studies using other measures have been unable to capture

an approach to poverty alleviation for large international development agencies abstract this essay explores the nature of the poverty alleviation problem from the perspective of international development funding agencies these agencies have been poorly structured to promote the interests of the poor agencies such as the world bank and the us agency for international development usaid can achieve better results by creating independent units devoted exclusively to poverty alleviation these units should immerse their staff more completely in local societies with lower pay scales and longer tours of duty a revised form of cost benefit analysis around which these units should orient their work is presented previous analyses of poverty alleviation opportunities and failures have neglected funding agency influences

when do firms generate evidence on in house electricity supply in africa this paper attempts to identify the underlying causes and costs of own generation of electric power in africa rigorous empirical analysis of 8483 currently operating firms in 25 african countries shows that the prevalence of own generation would remain high at around 20 even if power supplies were perfectly reliable suggesting that other factors such as firms size emergency back up and export regulations play a critical role in the decision to own a generator the costs of own generation are about three times as high as the price of purchasing subsidized electricity from the public grid however because these generators only operate a small fraction of the time they do not greatly affect the overall average cost of power to industry the benefits of generator ownership are also substantial firms with their own generators report a value of lost load of less than us 50 per hour compared with more than us 150 per hour for those without nevertheless when costs and benefits are considered side by side the balance is not found to be significantly positive

electricity shortages and firm productivity evidence from china s industrial firms unreliable inputs to production particularly those that are difficult to store can significantly limit firms productivity leading them to react in a number of ways this paper uses a panel of 23 000 energy intensive chinese firms from 1999 to 2004 to examine how firms responded to severe power shortages in the early 2000s our results suggest that in response to electricity scarcity chinese firms re optimize among inputs to production by substituting materials for energy both electric and non electric sources a shift from make to buy of intermediate inputs to production while outsourcing can be costly chinese firms were able to avoid substantial productivity losses by doing so as a result of the increase in electricity scarcity from 1999 onward we find that unit production costs increased by eight percent

alleviating transitory food crises in sub saharan africa international altruism and trade the donor community has responded to unexpected or transitory drops in domestic food production in many countries in sub sabaran africa an empirical framework estimates and analyzes the correlation between this food aid and domestic production both emergency food aid and commercial imports are used to offset the effects of negative output shocks in sub saharan african countries the major recipients of global emergency food aid on average every one ton drop in cereal production is offset by the delivery of 0 8 tons of cereal and dairy products from abroad over four years most food aid arrives within a year of a shock and correlation of shocks over time along with the differences between crop years and calendar years may explain the link between aid and production the economic and political considerations also determine the global response to the emergency food needs of countries in africa the international response is not contingent on the form of government or the level of political and human rights violations poorer countries and those with well established nonemergency food aid programs receive larger amounts of emergency aid when needed food aid has long helped low income countries to sustain domestic food supplies and cope with transitory food insecurity and it has also been used to accelerate agricultural development and increase food production but food aid has been heavily criticized in the past decade on several grounds first it has been charged that the international response to food crises is slow meager and inefficient a related accusation suggests that countries granting emergency food aid disciriminate on the basis of the political and economic orientation of the recipient country second food aid has been thought to discourage domestic food production thus leading to long term dependence on donors finally it has

competing models of international lending activity abstract four competing models of the world bank s lending to developing countries are constructed and econometrically estimated by pooled time series and cross section data the analysis suggests that a model combining economic and political determinants performs best besides per capita income inflation balance of payment and budget deficit external debt and past growth political determinants such as the capitalist climate or political instability are also important as well as a recipient country s former status as a colony or dominion this politico economic model is successfully used to forecast the distribution of ibrd loans and ida credits among the developing countries

electric infrastructure failures in nigeria a survey based analysis of the costs and adjustment responses abstract this paper examines the cost of electricity shortages on the nigerian manufacturing sector utilizing the data obtained from a 1998 nationwide survey the paper details the various costs from power outages and examines the response of manufacturers to the infrastructure problem the findings of the study confirm that the cost of electricity failures on the nigerian manufacturing sector is quite high firms incur huge costs on the provision of expensive back up to minimise the expected outage costs the average costs of this back up are on the average 3 times the cost of publicly supplied electricity the marginal cost estimates also indicate that the cost of kwh of unserved electricity in nigeria is very high small scale firms bear the greater proportion of the cost of the power failure a situation where firms spend as much as 20 30 of initial investment on the acquisition of facilities to enhance electricity supply reliability has a significant negative impact on costs competitiveness of the manufacturing sector thus the study supports current government efforts to privatise the public monopoly and liberalizes the electricity market these hopefully will mitigate the burden of poor power supply as well as introduce the needed competition into the electricity market in the country

when is foreign aid policy credible aid dependence and conditionality the author studies foreign aid policy within a principal agent framework he shows that one reason for foreign aid s poor overall record may be a moral hazard problem that shapes the aid recipient s incentive to undertake structural reform the model s basic prediction is a two way relationship disbursements of foreign aid are guided in part by the needs of the poor anticipating this recipients have little incentive to improve the welfare of the poor preliminary econometric work shows that the data support this hypothesis in principle conditionality could partly solve this problem but only if the donor can make a binding commitment to increase disbursements in good relative to bad states without such a commitment technology aid disbursements remain guided by the needs of the poor and recipient countries maintain a low effort to reduce poverty contrary to the conventional wisdom found in the aid literature the author shows that the welfare of all parties might be improved by using tied project aid or by delegating part of the aid budget to an international agency with less aversion to poverty

aid policy and growth in post conflict societies countries emerging from civil war attract both aid and policy advice this paper provides the first systematic empirical analysis of aid and policy reform in the post conflict growth process it is based on a comprehensive data set of large civil wars and covers 27 countries that were in their first decade of post conflict economic recovery during the 1990s the authors first investigate whether the absorptive capacity for aid is systematically different in post conflict countries they find that during the first three post conflict years absorptive capacity is no greater than normal but that in the rest of the first decade it is approximately double its normal level so ideally aid should phase in during the decade historically aid has not on average been higher in post conflict societies and it has tended to taper out over the course of the decade the authors then investigate whether the contribution of policy to growth is systematically different in post conflict countries and in particular whether particular components of policy are differentially important for this they use the world bank policy rating database the authors find that growth is more sensitive to policy in post conflict societies comparing the efficacy of different policies they find that social policies are differentially important relative to macroeconomic policies however historically this does not appear to have been how policy reform has been prioritized in post conflict societies

lobbying by ethnic groups and aid allocation we develop a political economic model of foreign aid allocation each ethnic group in the donor country lobbies the government to allocate more aid to its country of origin and the government accepts political contributions from lobby groups initial per capita income of the recipients and those of the ethnic groups are shown to be important determinants of the solution of the political equilibrium we also examine the effects of changes in the degree of corruption aid fatigue and ethnic composition in the donor country on the allocation of aid

compensation and productive efficiency in partnerships evidence from medical groups practice relatively little is known about the behavior and performance of firms organized as partnerships in this paper we attempt to fill that gap by developing and testing a model of the effect of alternative compensation arrangements on productive efficiency in medical group practices the technique employed is maximum likelihood production frontier estimation we provide a simple behavioral model of the determination of productive efficiency and a new interpretation of the economic measure of technical efficiency we derive a behavioral production function that relates production to individual responses to incentives and we indicate the impossibility of recovering the parameters of the production technology from observed behavior overall the empirical results indicate that incentives do affect productivity a larger number of members in a group decreases productivity while greater average experience leads to greater productivity

motivations for aid to developing countries abstract this paper attempts to identify the underlying principles of aid allocation and particularly the balance of motivations as between the needs of recipient countries and the interests of donor countries two alternative models are fitted by cross country regressions to bilateral and multilateral aid flows to some 80 developing countries in 1969 1970 and 1978 1980 the first recipient need model assumes that all aid is given to compensate for shortfalls in domestic resources this model provides a reasonable explanation for the distribution of multilateral aid but it is clearly not applicable for bilateral aid flows the second donor interest model assumes that all aid serves only donor interests defined to cover political security investment and trade interests this model gives generally good explanations of bilateral aid but is a poor fit for multilateral aid the relative importance of the various donor interests differs sharply among donors the paper ends with an analysis of the shift in the balance of aid over the 1970s towards the recipient need element and with a reference to the sharp change in policy in the 1980s towards increasing emphasis on donor interest aid

project appraisal and planning twenty years on this paper discusses the use and usefulness of social cost benefit analysis it briefly recalls the main features of the procedures put forward in the book by the authors and addresses some of the issues that have arisen in theoretical work since the early 1970s particularly the implications of uncertainty an analysis of the value of project appraisal under uncertainty is provided the rise and decline of project appraisal in the world bank and elsewhere is charted and reasons are considered particular attention is given to the difficulty of using shadow prices and to the institutional environment it is argued that evidence from analysis of the world bank s projects is consistent with placing a high value on the process of economic appraisal the costs of appraisal are noted as is the need to avoid excessive complexity the paper argues for the importance of an economic appraisal system and of attending to the incentives that operate in such a system

on the empirics of foreign aid and growth the present paper re examines the effectiveness of foreign aid theoretically and empirically using a standard olg model we show that aid inflows will in general affect long run productivity the size and direction of the impact may depend on policies deep structural characteristics and the size of the inflow the empirical analysis investigates these possibilities overall we find that aid has been effective in spurring growth but the magnitude of the effect depends on climate related circumstances finally we argue that the collier dollar allocation rule should be seriously reconsidered by donor agencies if aid effectiveness is related to climate the usefulness of foreign aid in promoting growth in developing countries has been an area of controversy ever since rosenstein rodan in 1943 advocated for aid to eastern and south eastern europe browsing through successive editions of a leading textbook in development economics provides a telling illustration of how the confidence in aid effectiveness dwindled over the years in the first edition of leading issues in economic development meier 1964 dedicated a full 18 page section to the issue of foreign aid he started out asking how much aid by the time of the sixth edition meier 1995 the treatment of foreign aid had been cut into half and the questions in focus were why official assistance and does aid work in the 2000 edition meier and rauch 2000 foreign aid is not even listed in the index

developing countries in need which characteristics appeal most to people when donating money paul hansen1 nicole kergozou2 stephen knowles1 and paul thorsnes2 1 department of economics university of otago 2 reserve bank of new zealand

project evaluation and uncertainty in practice a statistical analysis of rate of return divergences of 1 015 world bank projects this article analyzes the world bank s experience with project evaluation for a sample of 1 015 projects by comparing estimated rates of return at appraisal with reestimated rates of return when construction works are completed usually 5 to 10 years after appraisal the analysis highlights the high degree of uncertainty in project analysis a wide range of variables has been introduced to explain the observed divergence in appraisal and reestimated rates of return but only a relatively small part of the divergence can be explained even with the benefit of hindsight project analysis thus has to cope with a large degree of uncertainty which the traditional methods of project evaluation and selection have not been able to reduce

macroeconomic policies and project performance in the social sectors a model of human capital production and evidence from ldcs abstract this paper investigates the relationship between economy wide policies and the performance of investment projects in education and health sectors the model highlights the fact that the production of human capital requires an interaction of the demand for and supply of social services both are related to labor market conditions and macroeconomic policies a probit analysis shows that the probability of project failure is positively and significantly associated with indicators of macroeconomic instability and distortion and negatively associated with the overall dynamism of the economy economy wide policies therefore are crucial for the success of social projects which underscores the need of linking the lending in the social sectors to the overall policies and reforms

estimating aid allocation criteria with panel data in 1990 the net amount of economic aid or official development assistance to all recipients from all multilateral and bilateral sources was about 62 billion an amount that exceeded the gdps of greece and portugal despite the size of this yearly transfer there has been no rigors modeling and estimation of the criteria by which it occurs as a result there is little agreement about the extent to which oda is allocated according to the needs of the recipient countries the purpose of this paper is to develop a rigorous theoretical model of oda allocation that can be used to provide consistent estimates of the importance of recipient needs copyright 1994 by royal economic society

foreign aid and human development the impact of foreign aid to the health sector author affiliation claudia r williamson department of economics west virginia university p o box 6025 morgantown wv 26506 6025 usa e mail claudia williamson mail wvu edu acknowledgment i would like to thank the editor and two anonymous referees for their time valuable comments and helpful suggestions i would also like to thank peter t leeson and russell s sobel for their valuable comments and suggestions also i would like to thank matt e ryan for his helpful comments in addition i appreciate the comments received from tomi ovaska and the 2006 southern economic association conference participants 1 introductioninternational aid is one of the most powerful weapons in the war against poverty today that weapon is underused and badly targeted there is too little aid and too much of what is provided is weakly linked to human development united nations development programme 2005 p 75 according to the 2005 human development report united nations development programme 2005 there is a general consensus that foreign aid s first objective should be human development in 2000 governments from various countries met at the united nations and signed the millennium declaration a pledge to free our fellow men women and children from the abject and dehumanizing conditions of extreme poverty one way of achieving these goals is through development assistance united nations development programme 2005 this advice has been widely accepted in the donor community during the past five years because total aid to the health sector has more than doubled for example as illustrated in figure 1 from 1999 to 2004 aid to the health sector rose from 1930 to 4435 millions of 2004 dollars oecd 2007 figure 1 foreign aid to the health sector 1973 2004 figure omitted see article image with growing intensity given to international human development aid an analysis of its effectiveness is worthwhile both conceptual and empirical literature debates the effectiveness of foreign aid for economic development without a general consensus on the role of foreign assistance in economic development two contrasting hypotheses have emerged one is a public interest argument where some authors state that aid can and should be used to assist in the development process sen 1999 sachs 2005 the other is a public choice hypothesis that presents arguments indicating that foreign assistance is ineffective and has the potential to damage future growth opportunities bauer 2000 easterly 2001 these two competing hypotheses lead to different predictions on the use of foreign aid for human development for a clear answer one must turn to empirical analysis current empirical literature primarily supports the public choice perspective indicating that foreign aid is ineffective in promoting economic development filmer and pritchett 1999 svensson 1999 filmer hammer and pritchett 2000 2002 knack 2001 brumm 2003 brautigam and knack 2004 economides kalyvitis and philippopoulos 2004 djankov montalvo and reynal querol 2005 hartford and klein 2005 and heckelman and knack 2005 in these studies the authors focus on the impact of foreign aid on economic development and find no significant impact however in a recent study by gomanee girma and morrissey 2005 the authors show that aid can improve human welfare through increases in certain public expenditures supporting the public interest predictions their methodological approach neglects to control for endogeneity and this could lead to biased results thus further analysis is required with the recent shift in the promotion of aid from economic to human development it is timely to investigate the role of foreign aid for human development purposes this paper provides the next step in the literature by establishing the link between foreign aid and human welfare

competition for aid and trade policy this paper considers the optimal allocation of a given amount of foreign aid between two recipient countries it is shown that given consumer preferences a country following a more restrictive trade policy would receive a smaller share of the aid if the donor country maximises its own welfare in allocating aid if on the other hand the donor country allocates aid in order to maximize the sum of the welfare of the two recipient countries the result is just the opposite finally we analyze the situation where the recipient countries compete with each other for the given amount of aid it is shown that this competition tends to lower the level of optimal tariffs in the recipient countries

proliferation and fragmentation transactions costs and the value of aid abstract the problem of the proliferation of the number of aid donors and aid channels continues to worsen it is widely and plausibly believed that this significantly reduces the value of aid by increasing direct and indirect transactions costs we contribute to the existing literature by a categorising the apparent adverse effects of proliferation b producing a reliable and fair indicator of the relative degree to which the main bilateral donors proliferate or concentrate their aid c giving some explanation of why some donors proliferate more than others d constructing a reliable measure of the extent to which recipients suffer from the problem of fragmentation in the sources of their aid and e demonstrating that the worst proliferators among the aid donors are especially likely to be suppliers of aid to recipients suffering most from fragmentation there are significant implications for aid policy

power sector reform in south asia why slow and limited so far although south asian developing countries had initiated some form of electric power sector reform in the 1990s often under external lending agency pressures not much progress has been made so far and there is hardly any noteworthy example of a successful reform in the region this paper provides a brief review of power sector reform efforts in five south asian countries and uses an institutional economics framework to identify the factors shaping the success of power sector reforms four factors namely instability of rule makers poor overall acceptance slow adaptation and poor transition management are identified and their effect on the reform process of south asia are analysed the paper finds that political instability has affected the power sector reform of the region making hard decisions difficult to take slow progress of reform has also affected the sector viability as signs of adverse effects on the power sector investment and performance are already visible

a firm level analysis of outage loss differentials and self generation evidence from african business enterprises abstract this study examines the outage loss differential between firms that engage in backup generation and those that do not unmitigated outage losses were estimated to be us 2 01 23 92 per kwh for firms engaging in self generation and range from us 1 54 to 32 46 per kwh for firms without self generation we also find that firms engaging in self generation would have suffered additional 1 183 outage losses had they not invested in self generation on the other hand firms without self generation would have reduced their outage losses by around 6 46 if they had engaged in self generation further analyses however reveal that although engagement in self generation reduced outage losses a firm engaging in self generation may still suffer a greater unmitigated outage loss relative to a firm without a backup generator the relative outage losses depend on the relative vulnerability of the operations of the two sets of firms to power interruption and the relative generating capacity of a self generating firm to its own required electricity loads policy reforms that allow firms whose operations are highly vulnerable to outages to make a binding contract with utilities in order to get preferential supply are recommended

aid and debt relief in africa have they been substitutes or complements summary much attention has been paid to helping economies in sub saharan africa ssa to achieve the millennium development goals mdgs the conventional instruments for providing assistance have been foreign aid disbursements and debt relief but have debt relief initiatives complemented or substituted for other aid has debt relief been additional this paper examines the evolving relationship between debt relief and other foreign aid in ssa using recently constructed and improved data estimating a model of aid allocation for 42 ssa countries using panel data for 1988 2006 it finds that the relationships between debt debt relief aid and resource transfers have changed over time this paper interprets how policy changes may have modified the underlying relationship between aid and debt relief

what is the aggregate economic rate of return to foreign aid in recent years academic studies have been converging towards the view that foreign aid promotes aggregate economic growth we employ a simulation approach to i validate the coherence of empirical aid growth studies published since 2008 and ii calculate plausible ranges for the rate of return to aid our results highlight the long run nature of aid financed investments and the importance of channels other than accumulation of physical capital we find the return to aid lies in ranges commonly accepted for public investments and there is little to justify the view that aid has had a significant pernicious effect on productivity

does foreign aid mitigate the adverse effect of expropriation risk on foreign direct investment abstract we construct a model of fdi risk and aid where a country loses access to fdi and aid if the country expropriates fdi we show that i the threat of expropriation leads to under investment ii the optimal level of fdi decreases as the risk of expropriation rises and iii aid mitigates the adverse effect of expropriation risk on fdi the empirical analysis employs data for 35 low income countries and 28 countries in sub saharan africa over the period 1983 2004 we find that risk has a negative effect on fdi and that aid mitigates but cannot eliminate the adverse effect of risk

the cost of doing business in africa evidence from enterprise survey data summary data from the world bank enterprise surveys show that indirect costs related to infrastructure and services account for a relatively high share of firms costs in poor african countries and pose a competitive burden on african firms we estimate firm level revenue and value added functions for six industries in 17 developing countries demonstrating that firm performance is sensitive to the cost of indirect inputs as indirect inputs are not usually included in estimations of value added we argue that existing estimates understate the relative performance of african manufacturing firms

a model for irreversible investment with construction and revenue uncertainty this paper presents a model of investment in projects that are characterized by uncertainty over both the construction costs and revenues both processes are modeled as spectrally negative levy jump diffusions the optimal stopping problem that determines the value of the project is solved under fairly general assumptions it is found that the current value of the benefit to cost ratio bcr decreases in the frequency of negative shocks to the construction process this implies that the cost overruns that can be expected if one ignores such shocks are increasing in their frequency based on calibrated data the model is applied to the proposed construction of high speed rail in the uk and it is found that its economic case cannot currently be made and is unlikely to be met at any time in the next decade in addition it is found that ignoring construction uncertainty leads to a substantial probability of an erroneous decision being taken

the economic and political determinants of imf and world bank lending in the middle east and north africa mena assumes both political and economic significance politically it is arguably the epicentre of world crisis chronically war prone and the site of the world s most protracted conflicts hinnebusch 2003 p 1 economically it owns the bulk of the world s oil reserves driving in particular the usa economic engine in light of the region s geopolitically and economically strategic position in the world economy it is clear that economic and political factors are inextricably linked when it comes to the manner in which the west particularly the usa responds to the region s needs

does the chinese diaspora speed up growth in host countries summary we compiled a new enhanced data set on the population share of overseas chinese covering 147 countries over the period 1970 2010 linking the migration and economic growth literature this article attempts to estimate the impact of the chinese diaspora on economic growth in host countries regression results from both barro type and dynamic panel data models suggest that a country s initial relative endowment with overseas chinese is positively related to subsequent growth results are robust to a number of sensitivity tests the effect is transmitted via increased trade openness enhanced investment and general tfp effects

good countries or good projects macro and micro correlates of world bank project performance abstract this paper investigates macro and micro correlates of aid financed development project outcomes using data from over 6000 world bank projects evaluated between 1983 and 2011 country level macro measures of the quality of policies and institutions are strongly correlated with project outcomes consistent with the view that country level performance matters for aid effectiveness however a striking feature of the data is that the success of individual development projects varies much more within countries than it does between countries a large set of project level micro variables including project size project length the effort devoted to project preparation and supervision and early warning indicators that flag problematic projects during the implementation stage accounts for some of this within country variation in project outcomes measures of world bank project manager quality also matter significantly for the ultimate project outcomes we discuss the implications of these findings for donor policies aimed at aid effectiveness

exploring the schemes for green climate fund financing international lessons summary as a key issue in recent international climate summits the green climate fund gcf is confronted with the problem of insufficient financing this paper intends to explore several schemes for raising the public finance of the gcf among developed countries lessons from three main ongoing international financing mechanisms have been drawn including the united nations un membership dues official development assistance oda and the global environment facility gef the indexes that reflect historical emission responsibility hr and ability to pay ap are also used to share the burden results reveal that the ongoing international financing mechanisms vary in their burden sharing results and the shares of existing donors are driven by highly complex reasons weighting the hr un and gef approaches with the preference score compromises psc method could yield a compromise scheme in which the regional contributions are highly similar to those under the gcf initial resource mobilization from 2015 to 2018 gcf financing heavily depends on contributions from the developed countries even if the donor parties are extended to emerging economics this paper also finds that the decision of the united states to withdraw from climate finance will significantly increase the burden for other donors particularly for the european union the contribution share of which is predicted to increase to nearly 14 percentage points the schemes proposed in this study can provide a useful reference for gcf financing

funding self sustaining development the role of aid fdi and government in economic success this article challenges a long held development policy assumption that aid and foreign direct investment fdi serve as substitutes or complements in accelerating the development of the world s poorer countries we show both theoretically and empirically that aid and fdi affect development differently aid contributes powerfully to both economic growth and human development and the higher the level of human capital in a country the more aid contributes by contrast fdi at best has no effect on economic growth and actually slows the rate of human development in less developed countries we find no evidence that the degree of democratic responsiveness in government conditions the effectiveness of either aid or fdi although we do find that democracy independently increases human development in all but the most developed countries our results demonstrate that fdi and aid are not and cannot be substitutes in the development of the world s poorer countries nor even can they be thought of as complements certainly not at mid to low levels of development in the end poor countries need democracy and aid not fdi we are extremely grateful to susan rose ackerman gustav ranis frances rosenbluth kenneth scheve and participants at the leitner political economy seminar at yale university in december 2003 for very helpful comments we also received valuable suggestions from two anonymous reviewers stephen kosack would like to thank the national science foundation for the support of a graduate research fellowship

coping with poor public capital abstract despite recent successes in stabilization and structural reforms in many developing countries the private investment response to date has been mixed even among the strongest reformers this disappointing result can be partly explained by the continued poor provision of public capital and services we test this hypothesis using unique firm level data on investment and provision of public infrastructure services the results suggest that poor complementary public capital significantly reduces private investment however firms can substitute for deficient public services by investing in complementary capital themselves but this comes at a cost less productive capital will be installed

optimal management of transfers an odd paradox abstract this paper considers the case of transfers when there exists a serious preference misalignment between the transfer maker and the beneficiary the former wants to reduce the resulting outcome discrepancy through monitoring the use of the transfer and imposing sanctions if the discrepancy proves too large this external discipline combines with the internal discipline of the beneficiary that is his her willingness and ability to align with the transfer maker s objective besides the fact that costs of monitoring and sanctioning are explicitly taken into account an original feature of our model specification is that the two types of discipline are made comparable they can be summed up to obtain an aggregate discipline we show that paradoxically an exogenous improvement of internal discipline may be over compensated by a fall of external discipline total discipline thus decreases and the discrepancy between the actual and the intended uses of the transfer increases instead of decreasing another consequence is that the relationship between internal and total disciplines may be non monotonic these results generalize to alternative specifications of the basic model

the provision of incentives in firms i ncentives are the essence of economics despite many wide ranging claims about their supposed importance there has been little empirical assessment of incentive provision for workers the purpose of this paper is to critically overview existing work on the provision of incentives since the interests of workers and their employers are not always aligned a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm s interest this literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers these include piece rates options discretionary bonuses promotions profit sharing efficiency wages deferred compensation and so on my objective here is to evaluate this literature in the light of a growing empirical literature on compensation where possible i will address the literature from two perspectives first an underlying assumption of this literature is that individuals respond to contracts that reward performance accordingly i consider whether agents behave in this way and whether these responses are always in the firm s interest second i address whether firms write contracts with these responses in mind in other words do contracts look like the predictions of the theory incentives are provided to workers

aid policies and growth the authors of this paper use a new database on foreign aid to examine the relationships among foreign aid economic policies and growth of per capita gdp in panel growth regressions for 56 developing countries and 6 four year periods 1970 93 they find that the policies that have a great effect on growth are those related to fiscal surplus inflation and trade openness they construct an index for those three policies and have that index interact with foreign aid they have instruments for both aid and aid interacting with policies they find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies in the presence of poor policies aid has no positive effect on growth this result is robust in a variety of specifications which include or exclude middle income countries include or exclude outliers and treat policies as exogenous or endogenous they examine the determinants of policy and find no evidence that aid has systematically affected policies either for good or for ill they estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors pursuit of their own strategic interests in a counterfactual they reallocate aid reduce the role of donor interests and increasing the importance of policy such a reallocation would have a large positive effect on developing countries growth rates

can poor countries lobby for more us bilateral aid summary this article explores if countries can lobby the us government for the allocation of us bilateral foreign aid we consider an informational lobby model where lobbying has two effects first a direct effect by informing us policymakers about their countries needs second an indirect effect on policymakers by informing them about common interests in economic or geopolitical terms the lobbyist thus influences the decisions about the allocation of aid resources we estimate the effect of the recipient country s lobbying agents in obtaining foreign aid the econometric results show that lobbying positively affects the amount of bilateral aid received

community based electric micro grids can contribute to rural development evidence from kenya summary in this paper we clarify the mechanisms through which rural electrification can contribute to rural development through a detailed case study analysis of a community based electric micro grid in rural kenya we demonstrate that access to electricity enables the use of electric equipment and tools by small and micro enterprises resulting in significant improvement in productivity per worker 100 200 depending on the task at hand and in a corresponding growth in income levels in the order of 20 70 depending on the product made access to electricity simultaneously enables and improves the delivery of social and business services from a wide range of village level infrastructure e g schools markets and water pumps while improving the productivity of agricultural activities we find that increased productivity and growth in revenues within the context of better delivery of social and business support services contribute to achieving higher social and economic benefits for rural communities we also demonstrate that when local electricity users have an ability to charge and enforce cost reflective tariffs and when electricity consumption is closely linked to productive uses that generate incomes cost recovery is feasible 2008 elsevier ltd all rights reserved

do developing country wto members receive more aid for trade aft since the world trade organization wto doha development agenda dda negotiations started in 2001 the importance of aid for trade aft has been well recognised as a useful tool for facilitating trade economic growth and social development in developing countries at the wto hong kong ministerial conference in december 2005 the aft initiative was launched and many high income member countries pledged to increase their aft contributions particularly for the least developed member countries ldc this paper aims to assess whether and to what extent the wto s developing member countries have received more aft for this purpose a system generalised method of moments is applied to a sample of 118 recipient countries for the period 2001 10 we find evidence that while ldc wto members on average receive relatively more aft than other developing countries the difference has not increased since launch of the aft initiative among the three categories of aft the positive wto membership effect for ldc members increased for building productive capacity and for trade policy and regulation but declined for infrastructure

the political economy of foreign aid a model of the market for a public good what determines the type and quantity of overseas aid given by individual donor countries answers to this question in the existing literature are polarized into two groups one of them offers a theoretical treatment based on the theory of public goods which is not consistent with the available data and the other offers empirical correlations without any explanatory theory the first group for example pincus and olson and zeckhauser treats aid like defense as an international public good small countries on this approach are free riders spending relatively little themselves while deriving benefits from the expenditures of larger countries but this approach is not consistent with even a casual scrutiny of the oecd aid community in which broadly speaking the smallest countries are the most generous donors 2 the second group for example hoadley and beenstockdiscover correlations between a country s ratio of aid to gnp and certain independent variables which may be expected to influence it e g that country s gnp its dependence on foreign trade its government s position in the ideological spectrum and the state of the domestic economy 3 however these findings are not fitted into any theoretical framework so that it is difficult to work out what they really mean 4 the approach of this paper is to treat foreign aid as a public good for which there is a market albeit a highly imperfect one because the consumers donor country taxpayers are ignorant about the very nature let alone the price of the commodity they are buying on this view factors on the demand side i e taxpayers response to their country s aid program will help to determine the quantity of aid disbursed as well as factors on the supply side such as the donor government s desire to obtain strategic or trading benefits from aid this view

supervision and performance the case of world bank projects abstract this paper explores the impact of donor supervision on development project performance using data from world bank funded projects maximum likelihood estimation of a restricted ordered probit function finds that early supervision has a positive impact on performance given the size of world bank funded projects gains from increasing supervision far outweigh the costs the results provide evidence of an institutional bias toward lending at the expense of increased development impact

a poverty oriented cost benefit approach to the analysis of development projects abstract this essay presents a form of cost benefit analysis where benefits are defined in terms of contributions to basic human capabilities this capabilities approach to project analysis is contrasted with the us agency for international development s logical framework approach the world bank s economic cost benefit approach and distributionally sensitive economic cost benefit analysis i argue that international development agencies concessional resource transfers could contribute more to the well being of the world s poor if guided by this cost benefit approach than they do under current arrangements the notion of capabilities as fundamental requirements for well being has been developed by amartya sen

paradoxes associated with the administration of foreign aid abstract this paper shows that if because of administration costs or other wastes only a proportion of an aid reaches the recipient then it is possible that the donor is enriched by its act of charity the extent of the enrichment increasing with the extent of the leakage and or that the recipient is impoverished by aid the extent of the impoverishment increasing with the extent of the leakage these outcomes are possible even when trade is optimally restricted by donor or recipient

does economic analysis improve the quality of foreign assistance the world bank undertakes an annual expenditure of around 60 million on country specific economic analysis and advice for its member developing countries what is the impact of this economic and sector work on the quality of world bank lending it will be useful to know whether past analytical work has generated measurable economic benefits that will justify its continued provision in an environment of increasingly scarce resources this article sets out an idealized model of decision making in which a country manager makes a broad allocation of resources between lending services and economic and sector work given that decision the task manager for each project makes project specific decisions with respect to the allocation of resources between preparation and supervision the analysis indicates that economic and sector work has a significant positive impact on the quality of world bank loans the results provide clear evidence of underinvestment in economic and sector work and the analysis shows that resources can be switched from preparation and supervision to economic and sector work to the benefit of both the quality of programs and level of disbursements

empirical results of aid motivations australia s bilateral aid program abstract this paper briefly surveys the existing literature on the motivations of overseas aid the emphasis is on the two competing models of recipient need and donor interest and the paper estimates these two models using data for australian bilateral aid both the recipient need model and the donor interest model are supported by the econometric analysis this is in stark contrast to the results of other studies for large states such as the united states and the united kingdom these prior studies show no support for the recipient need model whereas the donor interest model is supported the atypical result for the australian bilateral aid program requires further analysis in terms of non nested hypotheses

aid and the dutch disease macroeconomic management when everybody loves you abstract countries that undertake serious and sustained programs of stabilization and structural adjustment should expect to attract significant new inflows of capital from donor countries and international institutions while apparently beneficial those flows can work at crosspurpose with other goals of the policy reforms in particular abundant foreign exchange loans can force an appreciation of the real exchange rate often through domestic inflation rather than a nominal appreciation in addition since the government is almost always the recipient of these loans it can crowd out the private sector if it increases its aggregate demand for domestic goods and services if the crowding out is accomplished by tight monetary policy it will fall primarily on private investment rather than consumption this paper shows that both of these problems have surfaced in ghana a country that has become a favorite of donors after demonstrating a serious commitment to policies promoted by the world bank and international monetary fund the paper also suggests modifications in macroeconomic policy that would help lower inflation and boost private investment

donor preferences and recipient fiscal behavior a simultaneous analysis of foreign aid we theoretically develop and empirically estimate a preference model determining foreign aid donor behavior aid access and levels are separately determined by endogenous budgetary allocations the international economic environment the distribution of income between countries basic human needs the small country effect and regional bias we find fungibility of aid in recipient budgets is due to donor and recipient preferences despite the importance of other economic influences we find a significant pro poor country bias in aid allocations although little aggregate influence of basic human needs or regional bias the small country effect is significant for two of six donors jel f35 o19 h 77

effective aid how democracy allows development aid to improve the quality of life abstract research into foreign aid has mostly focused on its ability to affect economic i e gdp per capita growth conclusions have been mixed i consider aid s effectiveness differently by its ability to improve quality of life i find that though aid does not affect quality of life in the aggregate it is effective when combined with democracy and ineffective and possibly harmful in autocracies the results suggest that aid would be more effective if it were combined with efforts to encourage democratization

comparative advantage and bilateral foreign aid policy this paper formulates the problem of bilateral aid allocation in terms of the comparative advantage framework it is argued that the adaptability of this framework to foreign aid critically depends on the assumption that each donor s aid budget is spent to a large extent on its home market this assumption is not contradicted by empirical evidence an analysis of swiss foreign aid data then suggests that there is scope for considerable gains from specialization we conclude that donors should coordinate their behavior according to their comparative advantage to achieve an optimal allocation of global aid resources

aid fragmentation and effectiveness what do we really know summary aid fragmentation is widely recognized as being detrimental to development outcomes we reinvestigate the impact of fragmentation in the context of growth bureaucratic policy and education focusing on a number of conceptually different indicators of fragmentation and paying attention to potentially heterogeneous effects across countries sectors and channels of influence our systematic and detailed reexamination of existing empirical studies shows that this differentiation is crucial in some sectors such as primary education donor concentration or limiting donor numbers appear to be detrimental rather than beneficial for development outcomes in other areas we find the expected negative effect but only when we conceptualize fragmentation as a lack of lead donors too limited concentration rather than in terms of donor numbers in all cases sufficient initial administrative capacity in recipient countries prevents the negative and reinforces the positive effects of fragmentation this stresses the importance of questioning the sweeping conclusions drawn by much of the previous literature based on what we currently know generalizing judgments about the effect of aid fragmentation may be misleading

darlings and orphans interactions across donors in international aid we examine how bilateral aid flows of an individual donor to a recipient depend on aid flows from all other bilateral and multilateral donors to that recipient we thereby assess to what extent issues including donor coordination free riding selectivity specialization and common donor interests drive bilateral aid allocations we find that others bilateral flows lead to a significant increase in aid flows from a particular donor but primarily within a given year the effects are particularly pronounced for large donors and so called darling recipients overall the results suggest that herding is a dominant feature of aid inter relationships this article is protected by copyright all rights reserved

donor policy rules and aid effectiveness abstract the present paper examines the macroeconomic impact of aid by introducing endogenous aid allocations into a neoclassical growth framework on this basis it is shown that donor policies can have important implications for the trajectory of recipients gdp per capita depending on specific donor policy choices aid disbursements may lead to faster transitional growth stagnation or cyclical growth moreover the analysis also suggests that donor policies may be part of the reason why foreign aid is not found to be uniformly effective in raising long run productivity across recipients

on the simultaneity problem in the aid and growth debate this paper shows that foreign aid has a significant positive average effect on real per capita gross domestic product gdp growth if and only if the quantitatively large negative reverse causal effect of per capita gdp growth on foreign aid is adjusted for in the growth regression instrumental variables estimates show that a 1 percentage point increase in gdp per capita growth decreased foreign aid by over 4 adjusting for this quantitatively large negative reverse causal effect of economic growth on foreign aid shows that a 1 increase in foreign aid increased real per capita gdp growth by around 0 1 percentage points

aid effectiveness opening the black box this paper examines the causality chain linking aid flows to development outcomes it argues that many of the questions policymakers and economists would like data to answer simply cannot be answered due to the complexity and noise along links in the chain and the problem of attribution it then examines what is known about aid effectiveness along different links in the causality chain finally it turns to recent trends in the way aid is delivered and the new model that appears to be emerging

aid intensity in africa abstract aid to sub saharan africa ssa is falling rapidly after reaching historically high levels in the early 1990s we provide a critical review of aid data and place the resource intensity of current flows in crosscountry and intertemporal perspective aid to ssa is not unusually high given the structural characteristics of african countries but it rose more rapidly than predicted until the mid 1990s we introduce the concept of transactions intensity and show that by some measures the management costs accompanying each dollar of aid to africa are comparatively high

volatility of development aid from the frying pan into the fire summary the paper building on the authors previous analysis examines the relative volatility of aid flows into developing countries and their domestic revenue using new data and three alternative measures of aid instability relative volatility vis a vis fiscal revenue unpredictability of aid disbursement relative to commitments and failure of aid to smooth fluctuations in aggregate income it finds that the volatility of aid flows is still much greater than that of domestic revenue and that this difference is not decreasing especially in very poor aid dependent countries this high volatility of inflows makes the macroeconomy hard to manage further the influence of aid has been procyclical and not countercyclical aid has failed to act either as a stabilizing force or as an insurance mechanism we argue that to counter these unwelcome trends donors need to be able to respond more speedily and effectively to large adverse shocks and their conditionalities need to become more flexible possibilities explicitly discussed elsewhere in this special section

an analysis of the power sector performance in nigeria abstract rapid economic growth and sustainable development depends largely on the level of infrastructural development of a nation this reasonably suggests that a good knowledge of the performance of infrastructural services in an economy is vital and an essential requirement for policy directed at attaining sound and vibrant economic development drawing from above the study analyses the overall performance of the nigeria power electricity sector and presents some policy guidelines for achieving a world standard power market and sustainable development the study found that the nigeria power sector is underperforming and there is an urgent need for proper policy towards achieving a quality and continuous well functioning electricity market in the country the installed capacity of the power plants in nigeria currently stands at about 6000 mw with just about 40 of it is generated annually this greatly constrains the local industries from competing regionally and internationally and also undermines industrialisation and employment generation in the country

power outages and economic growth in africa abstract this paper estimates the total effect of power outages on economic growth in sub saharan africa over the period 1995 2007 we pay close attention both to potential errors of measurement of african economic growth and to the endogeneity of outages as suggested by henderson et al american economic review 102 2 994 1028 2012 we combine penn world tables gdp data with satellite based data on nightlights to arrive at a more accurate measure of economic growth following andersen et al review of economics and statistics 94 4 903 924 2012 we also employ lightning density as an instrument for power outages our results suggest a substantial growth drag of a weak power infrastructure in sub saharan africa

managing underperformance risk in project portfolio selection we consider a project selection problem where each project has an uncertain return with partially characterized probability distribution the decision maker selects a feasible subset of projects so that the risk of the portfolio return not meeting a specified target is minimized to model and evaluate this risk we propose and justify a general performance measure the underperformance riskiness index uri we define a special case of the uri the entropic underperformance riskiness index euri for the project selection problem we minimize the euri of the project portfolio which is the reciprocal of the absolute risk aversion ara of an ambiguity averse individual with constant ara who is indifferent between the target return with certainty and the uncertain portfolio return the euri extends the riskiness index of aumann and serrano 2008 by incorporating the target and distributional ambiguity and controls the underperformance probability up for any target level our model includes correlation

aid fragmentation or aid pluralism the effect of multiple donors on child survival in developing countries 1990 2010 while most policy makers and researchers stress the negative impact of aid fragmentation on development outcomes in recipient countries we argue that the greater diversity of perspectives entailed by higher multiplicity of donors can help select better policies we hypothesize a u shaped relationship countries with a moderate number of donors fare better than countries with either few or many donors the hypothesis is supported by a generalized method of moments gmm analysis of the relationship between health aid donors and child survival in 110 low and middle income countries during 1990 2010

the anarchy of numbers aid development and cross country empirics the recent literature contains many stories of how foreign aid affects economic growth aid raises growth in countries with good policies or with difficult economic environments or outside the tropics or on average but with diminishing returns the diversity of the results suggests that many are fragile seven important aid growth papers are tested for robustness using 14 minimally arbitrary tests deriving mainly from differences among the studies themselves this approach investigates the importance of potentially arbitrary specification choices while minimizing the arbitrariness in testing choices all of the results appear fragile especially to sample expansion

aid policies and growth comment in an extraordinarily influential paper craig burnside and david dollar 2000 p 847 find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies but has little effect in the presence of poor policies this finding has enormous policy implications the burnside and dollar 2000 henceforth bd result provides a role and strategy for foreign aid if aid stimulates growth only in countries with good policies this suggests that 1 aid can promote economic growth and 2 it is crucial that foreign aid be distributed selectively to countries that have adopted sound policies international aid agencies public policy makers and the press quickly recognized the importance of the bd findings this paper reassesses the links between aid policy and growth using more data the bd data end in 1993 we reconstruct the bd database from original sources and thus 1 add additional countries and observations to the bd data set because new information has become available since they conducted their analyses and 2 extend the data through 1997 thus using the bd methodology we reexamine whether aid influences growth in the presence of good policies given our focus on retesting bd we do not summarize the vast pre bd literature on aid and growth we just note that there was a long and inconclusive literature that was hampered by limited data availability debates about the mechanisms through which aid would affect growth and disagreements over econometric specification see gustav f papanek 1972 robert cassen 1986 paul mosley et al 1987 peter boone 1994 1996 and henrik hansen and finn tarp s 2000 review since bd found that aid boosts growth in good policy environments there have been a number of other papers reacting to their results including paul collier and jan dehn 2001 carljohan dalgaard and hansen 2001 patrick guillaumont and lisa chauvet 2001 hansen and tarp 2001 robert lensink and howard white 2001 and collier and dollar 2002 these papers conduct useful variations and extensions some of which had already figured in the pre bd literature such as introducing additional control variables using nonlinear specifications etc some of these papers confirm the message that aid only works in a good policy environment while others drive out the aid policy interaction term with other variables this literature has the usual limitations of choosing a specification without clear guidance from theory which often means there are more plausible specifications than there are data points in the sample we differentiate our paper from these others by not deviating from the bd specification thus we do not test the robustness of the results to an unlimited number of variations but instead maintain the bd methodology this paper conducts a very simple robustness check by adding new data that were unavailable to bd thus we expand the sample used over their time period and extend the data from 1993 to 1997 easterly department of economics new york university 269 mercer street new york ny 10003 center for global development and national bureau of economic research e mail william easterly nyu edu levine department of finance carlson school of management university of minnesota 321 19th avenue south minneapolis mn 55455 and national bureau of economic research e mail rlevine csom umn edu roodman center for global development 1776 massachusetts avenue nw washington dc 20036 e mail droodman cgdev org we are grateful to craig burnside for supplying data and assisting in the reconstruction of previous results without holding him responsible in any way for the work in this paper thanks also to francis ng and prarthna dayal for generous assistance with updating the sachs warner openness variable and to three anonymous referees craig burnside and henrik hansen for helpful comments 1 see for instance the world bank 1994 2001 2002 the u k department for international development 2000 president george w bush s speech march 16 2002 the announcement by the white house on creating the millennium challenge corporation white house 2002 as well as a washington post editorial february 9 2002 a financial times column by alan beattie march 11 2002 and the economist march 16 2002

why donors of foreign aid do not coordinate the role of competition for export markets and political support development assistance has been criticised for a lack of coordination between aid donors this paper argues that competition for export markets and political support prevents donor countries from coordinating their aid activities between one another to test these hypotheses we perform logit and fractional logit estimations for a large sample of recipient countries and aid activities since the early 1970s our empirical results reveal that export competition between donors is a major impediment to aid coordination although less conclusive we also find some evidence that donors competition over political support prevents them from coordinating aid activities more closely

a new approach to the allocation of aid among developing countries is the usa different from the rest summary this paper attempts to explain the factors that determine the geographical allocation of foreign aid its novelty is that it develops a rigorous theoretical model and conducts the corresponding empirical investigations based on a large panel dataset we run regressions for different major donors united states canada france italy japan united kingdom and multilateral organizations with the explicit objective of establishing whether the united states in light of its geopolitical hegemony behaves differently from others we find that all the donors respond to recipient need in their allocation of aid but that the united states puts less emphasis on this than the other donors with the exception of japan we also find that the united states puts more emphasis on donor recipient linkages than do the other donors suggesting that the united states attaches greater importance to issues of donor interest for example geopolitical commercial and other links with specific recipients

aid proliferation and economic growth a cross country analysis summary we examine whether aid proliferation hinders economic growth by applying the standard aid growth regression to roodman s 2007 dataset with proper correction for possible biases arising from omitted variable and endogeneity problems specifically we include a donor concentration index to capture a low degree of donor proliferation and its interaction terms with aid variables as additional independent variables our empirical results show that the effect of aid concentration on economic growth is positive and favors the hypothesis that aid proliferation has a negative effect on the economic growth of recipient countries especially in africa

aid instability as a measure of uncertainty and the positive impact of aid on growth this article contributes to the literature on aid and economic growth we posit that uncertainty measured as the instability of aid receipts will influence the relationship between aid and investment how recipient governments respond to aid and will capture the fact that some countries are especially vulnerable to shocks when we account for uncertainty which is negative and significant we find that aid has a significant positive effect on growth largely due to its effect on the volume of investment the finding that uncertainty of aid receipts reduces the effectiveness of aid is robust when the regression is estimated for the sub sample of african countries these findings hold although the effectiveness of aid appears weaker than for the full sample

aid allocation and poverty reduction the authors derive a poverty efficient allocation of aid and compare it with actual aid allocations they build the poverty efficient allocation in two stages first they use new world bank ratings of 20 different aspects of national policy to establish the current relationship between aid policies and growth onto that they add a mapping from growth to poverty reduction which reflects the level and distribution of income they compare the effects of using headcount and poverty gap measures of poverty they find the actual allocation of aid to be radically different from the poverty efficient allocation in the efficient allocation for a given of poverty aid tapers in with policy reform in the actual allocation aid tapers out with reform in the efficient allocation aid is targeted disproportionately to countries with severe poverty and adequate polices the type of country where 74 percent of the world s poor live in the actual allocation such countries receive a much smaller share of aid 56 percent than their share of the world s poor with the present allocation aid is effective in sustainably lifting about 30 million people a year out of absolute poverty with a poverty efficient allocation this would increase to about 80 million people even with political constraints introduced to keep allocations for india and china constant poverty reduction would increase to about 60 million reallocating aid is politically difficult but it may be considerably less difficult than quadrupling aid budgets which is what the authors estimate would be necessary to achieve the same impact on poverty reduction with existing aid allocations

politics and the effectiveness of foreign aid abstract critics of foreign aid programs have long argued that poverty reflects government failure in this paper i test predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes i find that aid does not significantly increase investment nor benefit the poor as measured by improvements in human development indicators but it does increase the size of government the impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive but liberal political regimes and democracies ceteris paribus have on average 30 lower infant mortality than the least free regimes this may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs an implication is that short term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs

biases in the allocation of foreign aid some new evidence abstract the purpose of the paper is to examine the pattern of bilateral and multilateral foreign aid allocations during the 1970s cross section and pooled regressions for a set of roughly 90 countries where aid allocations have been relatively free of gross political overtones confirm the well known bias in per capita aid flows against populous countries butdo not provide evidence of a middle income bias instead regressions on 1976 1978 aid flows and per capita incomes of recipient countries seem to suggest a low income bias i e low income countries received more aid per capita than middle income countries yet there was asample of extremely poor countries which remained neglected in foreign aid allocations

aid and growth what does the cross country evidence really show abstract we examine the effects of aid on growth in cross sectional and panel data after correcting for the possible bias that poorer or stronger growth may draw aid contributions to recipient co

aid trade and migration how do bilateral flows interact this paper takes as its point of departure the european commission s position set out in 2005 which laid clear emphasis on aid and trade as tools for controlling immigration we attempt to subject this position to empirical investigation we exploit data on bilateral aid trade and migration flows between developed and developing countries for the period 2000 10 adopting an instrumental variable approach to address the endogeneity issue due to potential simultaneity bias our results establish that increasing aid and trade with developing countries is likely to fail to contain immigration at least in the short run the pattern of results is consistent with the hypothesis that promoting development in migrant sending countries or cooperating with such countries to control migration outflows is not sufficient to lessen immigration increasing visa restrictions and controls at borders is generally controversial still the results imply that policymakers cannot attain their short term immigration goals with the so called smart solutions of aid and trade

is foreign aid fungible the case of indonesia this paper considers whether foreign aid given for specific categories of expenditure is fungible among them and whether aid reduces tax effort by the recipient government models developed to analyze the fiscal relations among different levels of government in the united states are applied to analysis of the impact of foreign aid econometric analysis of data for indonesia reveals that aid is largely spent as the donors intended that aid does not lead to a reduction in tax effort and that aid is not diverted to nondevelopment current expenditures copyright 1990 by royal economic society

aid and growth regressions this paper examines the relationship between foreign aid and growth in real gdp per capita as it emerges from simple augmentations of popular cross country growth specifications it is shown that aid in all likelihood increases the growth rate and this result is not conditional on good policy there are however decreasing returns to aid and the estimated effectiveness of aid is highly sensitive to the choice of estimator and the set of control variables when investment and human capital are controlled for no positive effect of aid is found yet aid continues to impact on growth via investment we conclude by stressing the need for more theoretical work before this kind of cross country regressions are used for policy purposes

more dollars than sense refining our knowledge of development finance using aiddata summary in this introductory essay to the special issue we introduce a new dataset of foreign assistance aiddata that covers more bilateral and multilateral donors and more types of aid than existing datasets while also improving project level information about the purposes and activities funded by aid we utilize that data to provide a brief overview of important trends in foreign aid contributors to this special issue draw on aiddata as well as other sources to analyze aid transparency new donors not previously described or analyzed aid allocation and aid effectiveness our recurring theme in this introductory essay is that aiddata and these initial academic projects refine rather than revolutionize our understanding of aid the database has added significant numbers of new projects dollar amounts donors and details about those projects though there is much more yet to add we worry that aid debates have been driven by too little information and that many claims are based on limited or very poor evidence rectifying these problems will not be instantaneous refining knowledge takes a lot of time and hard work the common feature of the papers in this special issue is their careful attention to nuance and detail in spite of what some recent authors have claimed aid is neither a simple solution nor a sufficient cause of most problems in developing countries its motivations distribution and effects are complex and shifting capturing this complexity requires detailed data careful thought and sophisticated methods that allow scholars to make conditional causal and descriptive inferences 2011 elsevier ltd all rights reserved