financing<sup>39</sup> reasonable macro policies, strong institutions, cool climates and just coming out of a negative trade shock<sup>40</sup> are likely to be some of the most positively associated with growth –in turn suggesting that Denmark’s most effective (growth-promoting) aid policy would be to keep it all at home.

Having said that, many of the results appear fragile. A recent study examines the robustness of the policy, the policy and end of civil war, the diminishing marginal returns, the tropics, the small country/terms of trade/natural disaster and the negative export price shock relationships interactions with aid as causal elements in growth regressions. The study finds the aid-policy link the least robust while the aid-tropics link is the strongest.<sup>41</sup> The good policy result is sensitive to different definitions of aid, different samples of aid and different definitions of ‘good policy’ all of which knock it from statistical significance.<sup>42</sup> Perhaps unsurprisingly mirroring recent work on the causes of economic growth, the more robust aid-to-growth relationships appear to occur in non-tropical countries which also tend to be those with stronger institutions. This is a result echoed at the microeconomic level in studies of World Bank project outcomes.<sup>43</sup> The extent to which institutional development matters to outcomes is suggested by an OED evaluation of infrastructure projects in Africa (where only 18 percent of projects were considered sustainable): “Infrastructure projects require a level of institutional capacity that simply does not exist in many Sub-Saharan African countries.”<sup>44</sup> In this regard, it is important to note that institutions change slowly, and so that regardless of the level and persistence of aid flows there are likely to be limits to rates of progress. These limits are suggested by the fact that in the world as a whole over the 1970-1999 period only two countries grew as fast as would be required for Sub-Saharan Africa to grow to meet the poverty target of the Millennium Development Goals.<sup>45</sup> The importance of institutions for performance may vary by type of aid, however. Within World Bank instruments, for example, technical assistance loans appear to have performed almost as well in countries with weak institutions as in countries with strong institutions. This as opposed to structural and sectoral adjustment loans in particular which performed far worse in weak institutional environments (investment loans falling somewhere in between). Less than 30 percent of Structural Adjustment Loans were judged satisfactory by the Bank’s Operations Evaluation Department in countries that scored low marks on the Bank’s Country Policy and Institutional Assessment ratings compared to 100 percent satisfactory outcomes in high CPIA countries.<sup>46</sup>

# **Aid for Other Goals**

The preponderance of studies at the cross-country level have focused on income growth. Given the complex relationship between income growth and other potential targets for aid such as improved health or education, it is almost certainly not the case that aid attempting to maximize other targets would look the same as aid attempting to maximize 7