Aid effectiveness: research, policy and unresolved issues

Quibria, M.G. (2014): Aid effectiveness: research, policy and unresolved issues. Published in: Development Studies Research , Vol. 1, No. 1 (2014): pp. 75-87.

Abstract

This paper provides a critical review of the recent research on aid effectiveness. It argues that there is an enormous disjunction between research on aid effectiveness and current policies and practices: in particular, recent empirical research efforts have spawned a large body of work that is rife with controversies and insiders’ drama, but sheds little light on important policy issues regarding allocation, design, and delivery of foreign aid. The paper argues that a convergence of the two universes– research and policies – is essential both for a sophisticated understanding of the underlying issues and for formulating appropriate policies and practices for aid effectiveness.

• Item Type: MPRA Paper
• Language: English
• Keywords: aid effectiveness; poverty; growth; selectivity; aid policy
• Subjects: F - International Economics > F3 - International Finance > F35 - Foreign Aid

References

Adam, C. S., and D. L. Bevan. 2006. “Aid and the Supply Side:Public Investment, Export Performance, and Dutch Disease in Low-Income Countries.” World Bank Economic Review 20 (2): 261–290.

Adam, C. S., G. Chambas, P. Guillaumont, S. Guillaumont Jeanneney, and J. Willem Gunning. 2004. “performance-based Conditionality: A European Perspective.” World Development 32 (6): 1059–1070.

Alesina, A., and D. Dollar. 2000. “Who Gives Aid to Whom andWhy?” Journal of Economic Growth 5 (1): 33–63.

Alesina, A., S. Ozler, N. Roubini, and P. Swagel. 1996. “Political Instability and Economic Growth.” Journal of Economic Growth 1 (2): 189–211.

Barder, O., and N. Birdsall. 2006. “Payments for Progress: A Hands-Off Approach to Foreign Aid.” Working Paper no. 102. Washington, DC: Center for Global Development.

Bauer, P. T. 1966. “Foreign Aid: An Instrument for Progress?” The Freeman 16: 25–34.

Bauer, P. T. 1984. Reality and Rhetoric: Studies in the Economics of Development. Cambridge, MA: Harvard University Press.

Boone, P. 1996. “Politics and the Effectiveness of Foreign Aid.” European Economic Review 40 (2): 289–329.

Botchway, K., P. Collier, J. W. Gunning, and K. Hamada. 1998.Report by a Group of Independent Persons: External Evaluation of the ESAF. Washington, DC: IMF.

Buiter, W. H. 2004. “Country Ownership: A Term Whose Time Has Gone.” Remarks prepared for the development policy forum, “conditionality revisited”, organized by the World Bank, Paris, France, July 5.

Burnside, C., and D. Dollar. 1997. “Aid, Policies, and Growth.” Policy Research Working Paper no. 1777. Washington, DC: World Bank.

Burnside, C., and D. Dollar. 1998. “Aid, the Incentive Regime, and Poverty Reduction.” Working Paper no. 1937. Washington, DC: World Bank.

Burnside, C., and D. Dollar. 2000. “Aid, Policies and Growth.” American Economic Review 90 (4): 847–868.

Burnside, C., and D. Dollar. 2004. “Aid, Policies and Growth: Revisiting Evidence.” Policy Research Working Paper no. 3251. Washington, DC: World Bank.

Chauvet, L., and P. Guillaumont. 2004. “Aid and Growth Revisited: Policy, Economic Vulnerability and Political Instability.” In Annual World Bank Conference on Development Economics,Europe, 2003: Toward Pro-Poor Policies – Aid, Institutions and Globalization, edited by N. Stern, B. Tungodden, and I. Kolstad, 95–110. Washington, DC: World Bank.

Chenery, H. B., and A. M. Strout. 1966. “Foreign Assistance and Economic Development.” American Economic Review 56 (4):679–733.

Clemens, M. A., Radelet, S., Bhavnani, R. R., and Bazzi, S. 2012.“Counting Chickens When They Hatch: Timing and the Effects of Aid on Growth.” Economic Journal 122 (561): 590–617.

Collier, P., and J. Dehn. 2001. “Aid, Shocks, and Growth.” Working Paper no. 2688. Washington, DC: World Bank.

Collier, P., and D. Dollar. 2001. “Can the World Cut Poverty in Half? How Policy Reform and Effective Aid Can Meet International Development Goals.” World Development 29 (11): 1787–1802.

Collier, P., and D. Dollar. 2002. “Aid Allocation and Poverty Reduction.” European Economic Review 46 (8): 1475–1500.

Collier, P., and A. Hoeffler. 2004a. “Violent Conflict.” In Global Problems: Global Solutions, edited by B. Lomberg, 129–156. Cambridge: Cambridge University Press.

Collier, P., and A. Hoeffler. 2004b. “Greed and Grievance in Civil War.” Oxford Economic Papers 56 (4): 663–695. Collier, P., and A. Hoeffler. 2004c. “Aid, Policy and Growth in Post-Conflict Societies.” European Economic Review 48(5): 1125–1124.

Dalgaard, C., and H. Hansen. 2001. “On Aid, Growth and Good Policies.” Journal of Development Studies 37 (6): 17–41.

Dalgaard, C., H. Hansen, and F. Tarp. 2004. “On the Empirics of Foreign Aid and Growth.” Economic Journal 114 (496):191–216.

Deaton, Angus. 2013. The Great Escape: Health, Wealth, and the Origins of Inequality. Princeton, NJ: Princeton University Press.

Dixit, A. K. 2004. Lawlessness and Economics. Princeton, NJ: Princeton University Press.

Doucouliagos, H., and M. Paldam. 2009. “The Aid Effectiveness Literature: The Sad Results of 40 Years of Research.” Journal of Economic Surveys 23 (3): 433–461.

Drazen, A., and S. Fischer. 1997. “Conditionality and Selectivity in Lending by International Financial Institutions.” Paper presented at a symposium in memory of Michael Bruno, Jerusalem, November 23–24.

Durbarry, R., N. Gemmell, and D. Greenaway. 1998. “New Evidence on the Impact of Foreign Aid on Economic Growth.” CREDIT Research Paper 98/8, University of Nottingham.

Easterly, W. 2002. “The Cartel of Good Intentions: The Problem of Bureaucracy in Foreign Aid.” Journal of Policy Reform 5(4): 223–250.

Easterly, W. 2003. “Can Foreign Aid Buy Growth?” Journal ofEconomic Perspectives 17 (3): 23–48.

Easterly, W. 2006. The White Man’s Burden. New York: The Penguin Press.

Easterly, W., R. Levine, and D. M. Roodman. 2004. “New Data, New Doubts: A Comment on Burnside and Dollar’s ‘Aid, Policies, and Growth’.” American Economic Review 94 (3):774–780.

Fielding, D., and F. Gibson. 2012. “Aid and Dutch Disease in Sub-Saharan Africa.” WIDER Working Paper 26. Helsinki: World Institute for Development Economics Research.

Fosu, A. K. 2002. “Political Instability and Economic Growth: Implications of Coup Events in Sub-Saharan Africa.” American Journal of Economics and Sociology 61 (1): 329–348.

Glaeser, E. L., R. La Porta, F. Lopez-de-Silanes, and A. Shleifer. 2004.“Do Institutions Cause Growth?” NBER Working Paper no.10568. Cambridge,MA: National Bureau of Economic Research.

Guillaumont, P., and L. Chauvet. 2001. “Aid and Performance: A Reassessment.” Journal of Development Studies 37 (6): 66–92.

Gunning, J. W. 2000. “The Reform of Aid: Conditionality, Selectivity and Ownership.” Paper presented at the SIDA conference on “aid and development”, Stockholm, January 20–21.

Haan, J. de, and C. L. J. Siermann. 1996. “Political Instability, Freedom, and Economic Growth: Some Further Evidence.” Economic Development and Cultural Change 44 (2): 339–350.

Hadjimichael, M. T., D. Ghura, M. Muhleisen, R. Nord, and E. Ucer.1995. “Sub-Saharan Africa: Growth, Savings, and Investment,1986–93.” Occasional Paper no. 118. Washington, DC: International Monetary Fund.

Hansen, H., and F. Tarp. 2000. “Aid Effectiveness Disputed.”Journal of International Development 12 (3): 375–398.

Hansen, H., and F. Tarp. 2001. “Aid and Growth Regressions.”Journal of Development Economics 64: 547–570.

Hudson, J., and P. Mosley. 2001. “Aid Policies and Growth: In Search of the Holy Grail.” Journal of International Development 13 (7): 1023–1038.

Kanbur, R. 2006. “The Economics of International Aid.” In Handbook of The Economics of Giving, Reciprocity, and Altruism, edited by S. Christophe-Kolm and J. MercierYthier, Chapter 26, 1559–1587. Amsterdam: North-Holland.

Kanbur, R., T. Sandler, and K. Morrison. 1999. The Future ofDevelopment Assistance: Common Pools and International Public Goods. Washington, DC: Johns Hopkins Press for the Overseas Development Council.

Kaufmann, D., A. Kraay, and P. Zoido-Lobatón. 2002. “Governance Matters II: Updated Governance Indicators for 2000-01.” Policy Research Working Paper no. 2772. Washington, DC: World Bank.

Killick, T., R. Gunatilaka, and A. Marr. 1998. Aid and the Political Economy of Policy Change. London: Routledge.

Knack, S., and P. Keefer. 1995. “Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Measures.”Economics and Politics 7 (3): 207–227.

Lensink, R., and H. White. 1999. “Is There an Aid Laffer Curve?” CREDIT Research Paper 99/6. University of Nottingham.

Lensink, R., and H. White. 2001. “Are There Negative Returns to Aid?” Journal of Development Studies 37 (6): 42–65. Lucas, R. E. Jr. 1976. “Econometric Policy Evaluation: A Critique.” Carnegie-Rochester Conference Series on Public Policy 1 (1): 19–46.

McGillivray, M. 2003. “Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations.” WIDER Discussion Paper no. 2003/71. Helsinki: World Institute for Development Economics Research.

Mekasha, T., and F. Tarp. (2011). “Aid and Growth: What MetaAnalysis Reveals.” WIDER Working Paper 22. Helsinki: World Institute for Development Economics Research.

Millikan, M. F., and W. W. Rostow. 1957. A Proposal: Key to Effective Foreign Policy. New York: Harper and Row. Mosley, P., J. Harrigan, and J. Toye. 1995. Aid and Power. 2nd ed.London: Routledge.

Mosley, P., J. Hudson, and A. Verschoor. 2004. “Aid, Poverty Reduction and the ‘New Conditionality’.” Economic Journal 114 (496): F217–F243.

Mukherjee, S. 2010. The Emperor of All Maladies: A Biography of Cancer. New York: Scribner.

North, D. C. 1981. Structure and Change in Economic History. New York: Norton & Co.

North, D. C. 2000. “Institutions and the Performance of Economies over Time.” Keynote address, second annual global development conference, Tokyo, Japan, December 10–13.

Qian, Y. 2003. “How Reform Worked In China.” In Search of Prosperity: Analytical Narratives on Economic Growth, edited by D. Rodrik, Chapter 11, 297–333. Princeton, NJ: Princeton University Press.

Quibria, M. G. 2006. “Does Governance Matter? Yes, No or Maybe: Some Evidence from Developing Asia.” Kyklos 59 (1): 99–114.

Quibria, M. G. 2014. “Governance in Developing Asia: Concepts, Measurements, Determinants, and Paradoxes.” ERD Working Paper 388. Manila: Asian Development Bank.

Rajan, R., and A. Subramanian. 2007. “Does Aid Affect Governance?” American Economic Review 97 (2): 322–327.

Rajan, R., and A. Subramanian. 2008. “Aid and Growth: What Does the Cross-Country Evidence Really Show?” The Review of Economics and Statistics 90 (4): 643–665.

Rajan, R., and A. Subramanian. 2011. “Aid, Dutch Disease, and Manufacturing Growth.” Journal of Development Economics 94 (1): 106–118.

Ranis, G. 2006. “Toward the Enhanced Effectiveness of Aid.” Center Discussion Paper no. 938. New Haven, CT: Economic Growth Center, Yale University.

Rodrik, D. 2005. “Growth Strategies.” In Handbook of Economic Growth, edited by P. Aghion and S. Durlauf, Chapter 14, 967–1014. Amsterdam: North-Holland.

Roodman, D. M. 2007. “The Anarchy of Numbers: Aid, Development and Cross-Country Empirics.” World Bank Economic Review 21 (2): 255–277.

Rosenstein-Rodan, P. N. 1961. “International Aid for Underdeveloped Countries.” Review of Economics and Statistics 43 (2): 107–138.

Sachs, J. D. 2005. The End of Poverty: How We Can Make It Happen in Our Lifetime. New York: Penguin Books. Sen, A. 2011. “The Quality of Life: India vs. China.” The New York Review of Books.http://www.nybooks.com/articles/archives/ 2011/may/12/quality-life-india-vs-china/?page=2

Srinivasan, T. N. 2001. “Growth and Poverty Alleviation: Lessons from Development Experience.” Working Paper no. 17.Tokyo: ADB Institute.

Stiglitz, J. 1999. “The World Bank at the Millennium.” Economic Journal 109 (454): F577–F597.

Temple, J. 1999. “The New Growth Evidence.” Journal of Economic Literature 37 (1): 112–156.

Tirole, J. 1992. “Persistence of Corruption.” Institute of Policy Reform Working Paper no. 55. Washington, DC: Institute of Policy Reform.

Van de Walle, N. 2005. Overcoming Stagnation in Aid-Dependent Countries. Washington, DC: Center for Global Development.

World Bank. 1998. Assessing Aid: What Works, What Doesn’t, and Why. Oxford: Oxford University Press.

World Bank. 2004. IDA’s Performance-Based Allocation System: IDA Rating Disclosure and Fine-tuning the GovernanceFactor. Washington, DC: World Bank.

World Bank and International Monetary Fund. 2005. 2005 Review of the PRS Approach: Balancing Accountability and Scalingup Results. Washington, DC: World Bank.