project implementation units (PIUs), (4) aid predictability, and (5) coordination of technical assistance with national development strategies. We also include: (6) the Paris indicator of untied aid. This indicator is computed (following standard practice) from the DAC’s Creditor Reporting System (OECD 2009b).

_Use of country PFM systems_ is measured as the average of three sub-indicators on the share of donors’ aid to the government that uses recipients’ budget execution, financial reporting, and auditing systems.<sup>9</sup> _Use of procurement systems_ is similarly computed as a share of donors’ aid. _Coordinated technical assistance_ is computed as a share of the total (coordinated plus uncoordinated) technical assistance provided by the donor. Donor performance indicators for use of PFM systems, procurement systems, and coordinated technical assistance adjust for differences in recipient characteristics in fixed-effects regressions using the SMPD data on all donor-recipient pairs with positive values of aid. The _number of PIUs_ adjusts similarly for recipient fixed effects, but also for donors’ aid volumes in each country, as more aid not surprisingly is associated with more PIUs.<sup>10</sup> In constructing the alignment sub-index, all variables are standardized to have a mean of 0 and standard deviation of 1. For PIUs, the standardized value is multiplied by -1, so that larger values indicate better performance as in the case of all other variables in the sub-index.

_Aid predictability_ is measured as the share of aid donors scheduled for disbursement in 2007 that donors report as actually disbursed within the year. In many cases, actual disbursements exceed rather than fall short of planned disbursements. We follow World Bank (2009) in taking the absolute deviation between the two values, expressed as a share of the larger of the two. Finally, unlike the World Bank paper, we adjust this value for recipient fixed effects, to account for any characteristics of the recipient that could induce all donors operating in that country to exceed or fall short of planned disbursements. Note that this indicator measures predictability only over the short term. Kharas (2008) addresses the important question of aid volatility over the medium term and the contribution of aid from some large donors to volatility of aid receipts, but most donors in our sample and the other donor rankings are not included in that study.

_Untied aid_ is measured as the share of aid commitments for 2007 reported to the CRS that is recorded as neither tied nor partially tied to purchases from the donor country (OECD 2009b). Tying aid has been estimated to increase costs of procurement by 15 to 30 percent (Jepma 1991). Many countries do not report the tied status of some of their aid activities. Rather than omitting this aid from the denominator, we follow Easterly (2002) in treating aid with unreported tying status as tied. Such aid is disproportionately technical assistance, which is more often tied than other aid categories. Non-reporting of tying status is likely motivated in part by the desire to avoid showing a high ratio of tied aid (OECD 2009b); thus omitting unreported aid from both numerator and denominator would overstate the untied aid share for donors that do not report fully. Forced to choose between an indicator that overstates the share of untied aid for less-transparent donors or understates it, we prefer the latter. Of the two alternatives, our preferred one also has the benefit of being more highly correlated with our other aid alignment indicators, which improves the internal reliability of the sub-index. It is debatable whether to give the non-bilateral donors credit for

> 9 One might think that aid effectiveness might be enhanced by bypassing the weakest PFM systems.  In that case, it could be argued that donors should not be penalized for failing to use PFM systems where they are below a minimum threshold of quality.  As it turns out, applying a rule like this does not affect donor scores in our data.  Specifically, we replicated the use of country PFM systems indicator after dropping from the SMPD the 8 countries with the lowestquality PFM systems, as measured by the Paris Declaration indicator on reliability of country systems (the CPIA indicator on PFM quality).  The resulting indicator is correlated with the original at .99.

> 10 Specifically, we regressed the log of (the number of PIUs + 1) on log of donor aid in the country, and on donor and recipient dummies.  Donor aid volumes are highly significant (at .001 level), and the number of PIUs is estimated to increase by about 10% with a doubling of aid.

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