title: Assessing potential effects of development cooperation on inequality
Creators: name: Negre, Mario
Publisher: name: German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE)
publisherIdentifier: https://ror.org/01t3zke88
publisherIdentifierScheme: ROR
Year: 2021
Subjects: subject: 2030 Agenda
subject: poverty
subject: inequality

description: With inequality reduction now being officially and broadly recognised as a key
 development objective with its own Sustainable Development Goal (SDG 10), there is a need
 for simple, economical and quick methodologies with which to focus on this area and assess
 progress. This paper presents such a methodology, which allows a rough assessment of the
 potential impacts of development cooperation on income, consumption and wealth inequality.
 <br> This is important, as a rigorous causal analysis of the contribution development
 cooperation makes to reducing a partner country’s inequality is complex and costly. First,
 the relative contribution of targeted development cooperation programmes and projects to
 the economies of partner countries tends to be small (though admittedly not in all cases).
 Second, a myriad of factors contribute to changes in inequality in any given country, and
 assessing the impact of all of them is a complex, imprecise, time-consuming and
 resource-intensive exercise. <br> The proposed methodology therefore makes use of SDG
 10’s focus on the poorest 40% of the population to assess whether development cooperation
 in a given partner country has been directly targeted at them. <br> This Briefing Paper
 presents a simple methodology to support donors or multilateral development cooperation
 institutions in assessing, addressing and mainstreaming inequality in their operations.
 The first step of the methodology recommends that development agencies identify a
 country’s needs in terms of inequalities as a basis for providing support for policies and
 interventions to address them. The second step consists of making sure that inequality has
 been taken into account in key strategic documents. Subsequent steps aim to assess whether
 the design and implementation of specific programmes, projects and budget support
 operations targets inequalities. <br> In the case of projects and programmes, the
 recommended assumption is that if their direct beneficiaries are in the bottom 40%, then
 these projects and programmes can be considered to address inequality. For the sake of
 simplicity and practicality, this does not account for general equilibrium or indirect
 effects. In the case of budget support of any kind, any indication of the distributional
 profile of government expenditure in the area of support can be used as a proxy for the
 support’s distributional profile. <br> As a complement to this, it may be possible in
 many cases to analyse whether the subnational geographic allocation of funds corresponds
 to the location of the national bottom 40%. Despite many good reasons why funding should
 not always go to poorer areas, this information may provide important insights. <br> A
 key limitation of this approach is that disregarding indirect or general equilibrium
 effects does not establish any causal link between targeting and macroeconomic effects on
 inequality. Yet it does allow an assessment of the degree to which portfolios (or parts of
 them) are potentially addressing inequality, thereby providing important feedback for
 development actors.
description: Briefing Paper, 4/2021