The indicators can be adjusted or aggregated in innumerable ways, some of which may be equally as valid or intuitive as those we present in Table 4. As one example, indicators or sub-indexes could be weighted based on component or factor loadings from principal components or factor analysis. Our explorations with this approach show that it would tend to reduce the weight of our specialization sub-index and its component indicators; it would therefore slightly improve the overall rankings of donors that score poorly on those indicators, relative to donors who do well on them.<sup>24</sup> However, the broad outlines of the scores and rankings would not change much under a principal-components or factor-analysis approach.

# **Comparisons with other indexes of aid quality and quantity**

Table 4 also compares our overall index rankings with two previous aid quality indexes, from Easterly and Pfutze (2008) and Roodman (2006 and 2009). As part of the Center for Global Development’s annual ―Commitment to Development Index‖ (CDI), Roodman constructs measures of quality-adjusted aid volumes, using plausible but strong assumptions concerning how aid selectivity, aid tying, and project proliferation reduce the effective value of aid.<sup>25</sup> Although the final product of this exercise used in the CDI is (quality-adjusted) aid quantities, Roodman produces an implicit aid quality index, equal to his quality-adjusted aid volumes as a fraction of his ―net aid‖ or pre-quality-adjusted aid volumes. The aid data used in the 2009 CDI are from the year 2007, so are comparable to ours.

Easterly and Pfutze (2008) rank donors on an index of ―best practices in aid.‖ Their sub-indexes on selectivity (based on poverty, corruption and democracy) and specialization (geographic and sectoral) are fairly similar to two of ours, although their specialization index is constructed to favor smaller donors. A third sub-index on ―ineffective aid channels‖ penalizes donors for providing tied aid, food aid, and technical assistance. The rationale for categorizing food aid and technical assistance as ineffective is mostly that they are tied to purchases from the donor country, so it would be more accurate to call it simply an aid tying index. Their final two sub-indexes are based on newly collected data on overhead costs and on transparency, as measured by providing readily accessible information on operating costs and by full reporting of aid data to the OECD-DAC. While transparency and overhead costs are not unimportant issues, especially for aid research, they have not been central to the aid effectiveness debates and are largely absent from the Paris Declaration. Moreover, Easterly and Pfutze acknowledge that there are serious difficulties in measuring these indicators accurately.

While our various overall indexes produce very similar rankings, they differ considerably from those of Easterly-Pfutze and Roodman. Our main ―Overall‖ index is correlated with Roodman’s at .60, and with Easterly-Pfutze’s at only. 25.<sup>26</sup> (See Figure 2.) Of the donors ranked in the top 5 by our Overall index, only the World Bank appears in the top five on both of their rankings. The Asian

> 24 We do not rely on principal components (or factor) analysis to identify the number or content of sub-indexes, because any donor with missing data on any of the 18 indicators (i.e. nearly half of them) is dropped by that type of analysis.  In a principal components analysis on this limited sub-sample, the selectivity, alignment, and harmonization indicators all load most heavily on the first component, and the specialization indicators load most heavily on the second component. 25 In addition to its aid component, the CGD index also ranks donor countries on trade, migration and other policies affecting developing countries that are not applicable to multilateral agencies.  Nevertheless, Roodman constructs aid quality measures for the multilaterals, and credits their results to bilateral donors in proportion with the contributions received from each bilateral donor country.

> 26 Remarkably, our overall index is correlated at .56 with Mosley’s (1985)aid quality index for 14 bilateral donors using data from 1979 on poverty selectivity, untied aid, grant element, and share of aid going to agriculture and social infrastructure.  Correlations of Mosley’s index with our selectivity sub-index (.67) and our poverty selectivity indicator (.76) are particularly high.

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