# **2. What do we know about project effectiveness? A review of the literature**

A growing body of literature examines the factors associated with aid effectiveness at the project level and tries to understand both the characteristics of successful projects and the contexts in which those projects are more likely to succeed. We conducted a systematic review of the published and grey literature on the topic, using a two-step approach. First, we searched four meta-databases – JSTOR, SSRN, RePEc, and Google Scholar – for articles posted between 2000 and 2021 containing the keywords ("project quality" AND "development") OR ("project success" AND "development"). Results were screened according to the following inclusion criteria: (a) a considered paper analyzes projects funded by multilateral financial institutions or bilateral development cooperation agencies, and (b) a considered paper employs quantitative empirical analysis with projects as the unit of analysis. Additional relevant articles were identified through the reference lists of the included articles. The full list of reviewed studies is available in Annex 1.

The outcome variable in most of the studies reviewed is the ex-post success rating produced by donor staff and evaluation experts. This rating intends to capture a project's relevance, effectiveness, efficiency, sustainability, and impact, and map onto a broader OECD Development Assistance Committee standard (OECD, 2019). The literature on donor effectiveness uses these ratings extensively, considering them a noisy but valid measure of project performance (Briggs, 2020; Denizer et al., 2013; Dreher et al., 2013; Geli et al., 2014). Other outcome variables documented at the project level are the economic rate of return (Isham et al., 1997; Mubila et al., 2000) and the disbursement profile (Álvarez et al., 2012; Kilby, 2013; Kersting and Kilby, 2016).

We discuss the identified papers’ findings by the categories of explanatory factors investigated, which fall under three clusters: (i) project characteristics, (ii) staff/management characteristics, and (iii) country characteristics.

# **_2.1. Project characteristics_**

To the extent that previous contributions have examined the importance of project design, they have been concerned mainly with easily observable characteristics like size, duration and sector.

Project size is typically proxied by the total financial amount pledged or spent. Evidence on whether project size is indicative of project performance is mixed, ranging from positive (Shin et al., 2017; Winters, 2019; Wood et al., 2020) to irrelevant (Geli et al., 2014; Caselli and Presbitero, 2021) and negative (Denizer et al., 2013). However, having disbursements fall short of commitment amounts is associated with worse outcomes, suggesting that poor-performing projects may be cut short (Feeny and Vuong, 2017).

Regarding project length, projects that take longer to implement are less likely to be successful, regardless of whether the completion time meets a planned deadline (Geli et al., 2014) or exceeds the deadline (Bulman et al., 2017). This finding generalizes across most donors (Briggs, 2020).When dividing project length into the duration of various stages of the project cycle, these durations are differentially associated with project success. Longer preparation time is positively correlated with success (Chauvet et al., 2013; Kilby, 2015), while delays between approval and the start of implementation are negatively correlated with success (Denizer et al., 2013).

Other dimensions of project design examined in the literature include sectors, funding sources, and implementation counterparts. Winters (2019) finds that World Bank projects with co-financing from foreign and/or domestic sources receive somewhat worse ratings, though this effect explains only a small part of 5