Essays on the allocation and efficacy of foreign aid at the sub-national level
Creators: name: Munyanyi, Musharavati
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 380199
subject: Applied economics not elsewhere classified
classificationCode: 380299
subject: Econometrics not elsewhere classified

description: This thesis is comprised of four related chapters on the allocation and efficacy of foreign aid at the sub-national level. The first empirical chapter (Chapter 2) examines the effect of aid on child health outcomes in the Democratic Republic of Congo (DRC). It explores outcomes relating to three health categories: 1) prevalence of anaemia, 2) vaccination rates and 3) mortality rates. Using data from AidData and Demographic and Health Surveys (DHS), results from difference-in-differences (DID) estimations show that aid increases vaccination coverage, reduces mortality rates, and lowers the prevalence of anaemia among children living close to an aid project site. Further, the chapter examines the role of aid in influencing the gender gap in child health outcomes. The results show that aid narrows the gender gap in anaemia prevalence, mortality, and vaccination rates against child-related diseases. Based on the findings, the chapter suggests that widely spread aid projects that increase the chance of household proximity can be useful in achieving desirable health outcomes.

The second empirical chapter (Chapter 3) contributes to the literature on foreign aid effectiveness by examining the effect of foreign aid on energy poverty. Using five rounds of DHS and sub-national aid data for Senegal, the chapter finds that aid lowers the probability of energy poverty. The main results show that living within a 25-kilometre radius of an aid project reduces the likelihood of being energy-poor by 3.3 percentage points. This finding is robust to a suite of sensitivity checks. The chapter also examines four channels through which aid could influence energy poverty – income poverty, education, health, and economic growth – and finds that income poverty, education and economic growth are mechanisms through which aid transmits to energy poverty.

The third empirical chapter (Chapter 4) examines the impact of temperature shocks on household borrowing using three waves of Malawian household data from the World Bank Microdata Library and weather data from the University of Delaware’s online database. Applying a panel fixed effects model, the results show that temperature shocks positively affect household borrowing. These results are robust to several checks, including using alternative measures of temperature shocks and household borrowing, applying additional lags on the temperature shocks variable, and controlling for other factors, such as rainfall. Further, obtaining foreign aid data from AidData, the chapter explores foreign aid as a potential sub-national transmission channel through which temperature shocks may influence household borrowing. Findings suggest that total foreign aid and sectorial-targeted foreign aid are channels through which the impact of temperature shocks on household borrowing are mediated. The chapter advocates for policies and strategies that enable households to adapt and become resilient to temperature shocks.

The fourth empirical chapter (Chapter 5) contributes to the literature by examining the effect of natural resources on foreign aid allocation. The chapter extracts district-level data on natural resources and foreign aid for a panel of three countries for the period 2000 to 2014. Estimating a fixed-effects model, the results show that locations with natural resources are positively associated with the receipt of foreign aid. The chapter also investigates channels through which natural resources may influence foreign aid. The results show that conflict and economic growth mediate the relationship between natural resources and aid.