regressing the donor dummy coefficient estimates on the log of that donor’s total aid commitments for 2007 in AidData, and taking the residuals as a donor performance indicator for average project size. Our resulting project size indicator is correlated with Roodman’s ―size weight‖ indicator for 2007 at .73.

The Paris Declaration calls for donors to delegate aid efforts to other donors in some countries and sectors more often. Neither the SMPD nor any other survey systematically collects data on delegation of this sort, but from a broader perspective, delegating aid delivery to multilateral donors can be viewed as consistent with this goal. Channeling aid through multilaterals can reduce the problems associated with aid fragmentation described above. Multilaterals have particular sectoral and geographic mandates, so channeling aid through them will often reduce the number of donorrecipient-sector combinations of existing aid relationships. Multilaterals’ particular mandates also tend to give them greater expertise in many countries or sectors, compared to most bilaterals (especially the newer or smaller donors). As a sixth aid specialization indicator, we therefore take _contributions to multilateral donors_ (other than the EC<sup>18</sup> ) as a share of total ODA for each bilateral donor. This indicator is coded as missing data for the multilateral donors themselves.

A final indicator of aid specialization is _administrative costs_ as a share of aid, as reported by donors to the DAC. Donors that fragment their aid more excessively by recipient, sector, project and other dimensions are likely to incur higher administrative costs.<sup>19</sup> We construct a fourth sub-index on Aid Specialization from these seven indicators, by standardizing them, reversing the signs where appropriate (for administrative costs, number of recipients aided, and average number of sectors aided), and taking the mean. The mean inter-item correlation among the seven standardized sub-index components is .26, producing an alpha coefficient of internal reliability for the sub-index of .71 (Table 2).

# **Other indicators**

We have chosen not to include among our aid quality indicators several measures proposed by other researchers. Generosity of repayment terms for aid—with grants as the ―best‖ form of aid—is one of several aid quality indicators in Mosley (1985) and in White and Woestman (1994), and Bulow and Rogoff (2005) urge development banks to give aid in the form of grants instead of loans, on transparency and other grounds. We agree, however, with Easterly (2007: 666) that grants ―may have other problems such as not requiring the kind of long-run investment that would generate returns to repay loans.‖ Grants versus loans is therefore in our view an overly ambiguous indicator of aid quality. It is more easily viewed as an aid quantity issue, and Roodman (2006 and 2009) simply deals with it by netting out both interest and principal repayments from aid volumes prior to implementing his quality adjustment procedures.

Easterly and Pfutze include food aid and technical assistance as indicators of bad aid practices, largely on grounds that they tend to be tied to purchases from the donor country. They (and we) already include a direct measure of untied aid, so the fact that food aid and technical assistance are often (but not always) tied is a weak rationale for counting them against donors. They note that technical assistance is ―often condemned as reflecting donor rather than recipient priorities‖, but

> 18 The EC in important respects is more like a bilateral than a multilateral agency.  For example, Martens and others (2002: 192) report that ―national representatives in EC foreign aid decision-making committees spend a considerable part of their time exploring and pursuing contract opportunities for national suppliers.‖

> 19 If fixed costs of establishing an aid program are large, administrative costs could be a higher share of ODA for smaller donors.  No such relationship is found in the data, however, so we do not adjust the administrative costs indicator for donor size.

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