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Fungibility and the flypaper effect of project aid: Micro-evidence for Vietnam

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  • van de Walle, Dominique
  • Mu, Ren

Abstract

While most economists assume that aid is fungible, most aid donors behave as if it is not. The authors study recipient government responses to development project aid in the context of a specific World Bank-financed project. They estimate the impact of a rural road rehabilitation project in Vietnam on the kilometers of roads actually rehabilitated and built. Using local-level survey data collected for this purpose, the authors test whether the evidence supports the standard economic argument that there will be little or no impact on rural roads rehabilitated, given fungibility. They find evidence that, although project aid impacts on rehabilitated road kilometers were less than intended, more roads were built in project areas. The results suggest that there was fungibility within the sector, but that aid largely stuck to that sector.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 84 (2007)
Issue (Month): 2 (November)
Pages: 667-685

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Handle: RePEc:eee:deveco:v:84:y:2007:i:2:p:667-685

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  1. Ravallion, Martin, 2008. "Evaluating Anti-Poverty Programs," Handbook of Development Economics, Elsevier.
  2. Pack, Howard & Pack, Janet Rothenberg, 1993. "Foreign Aid and the Question of Fungibility," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 258-65, May.
  3. Guido W. Imbens, 2004. "Nonparametric Estimation of Average Treatment Effects Under Exogeneity: A Review," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 4-29, February.
  4. Pack, Howard & Pack, Janet Rothenberg, 1990. "Is Foreign Aid Fungible? The Case of Indonesia," Economic Journal, Royal Economic Society, vol. 100(399), pages 188-94, March.
  5. Keisuke Hirano & Guido W. Imbens & Geert Ridder, 2000. "Efficient Estimation of Average Treatment Effects Using the Estimated Propensity Score," NBER Technical Working Papers 0251, National Bureau of Economic Research, Inc.
  6. Khilji, Nasir M. & Zampelli, Ernest M., 1994. "The fungibility of U.S. military and non-military assistance and the impacts on expenditures of major aid recipients," Journal of Development Economics, Elsevier, vol. 43(2), pages 345-362, April.
  7. John Roemer & Selva Demiralp & Holly Liu & Jeffrey Williams, 2003. "The 'Flypaper Effect' is not an anomaly," Working Papers 04, University of California, Davis, Department of Economics.
  8. Feyzioglu, Tarhan & Swaroop, Vinaya & Zhu, Min, 1998. "A Panel Data Analysis of the Fungibility of Foreign Aid," World Bank Economic Review, World Bank Group, vol. 12(1), pages 29-58, January.
  9. Hanan G. Jacoby, 2002. "Is There an Intrahousehold "Flypaper Effect"? Evidence From a School Feeding Programme," Economic Journal, Royal Economic Society, vol. 112(476), pages 196-221, January.
  10. Alberto Abadie & Guido W. Imbens, 2006. "On the Failure of the Bootstrap for Matching Estimators," NBER Technical Working Papers 0325, National Bureau of Economic Research, Inc.
  11. Alberto Abadie & Guido W. Imbens, 2006. "Large Sample Properties of Matching Estimators for Average Treatment Effects," Econometrica, Econometric Society, vol. 74(1), pages 235-267, 01.
  12. Jeffrey Smith & Petra Todd, 2003. "Does Matching Overcome Lalonde's Critique of Nonexperimental Estimators?," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20035, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  13. James R. Hines & Richard H. Thaler, 1995. "The Flypaper Effect," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 217-226, Fall.
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Cited by:
  1. Morrissey, Oliver, 2012. "Aid and Government Fiscal Behaviour: What Does the Evidence Say?," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  2. Mu, Ren & van de Walle, Dominique, 2007. "Rural roads and poor area development in Vietnam," Policy Research Working Paper Series 4340, The World Bank.
  3. Antonio Estache, 2010. "A survey of impact evaluations of infrastructure projects, programs and policies," Working Papers ECARES 2010_005, ULB -- Universite Libre de Bruxelles.
  4. Cadot, Olivier & Fernandes, Ana & Gourdon, Julien & Mattoo, Aaditya, 2013. "Are the Benefits of Export Support Durable? Evidence from Tunisia," CEPR Discussion Papers 9758, C.E.P.R. Discussion Papers.
  5. Fabrizio Carmignani & Grace Lordan & KK Tang, 2010. "Does aid for HIV respond to media pressure?," Discussion Papers Series 414, School of Economics, University of Queensland, Australia.
  6. Fernando Aragon, 2009. "The Flypaper Effect Revisited," STICERD - Economic Organisation and Public Policy Discussion Papers Series 004, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  7. Wagstaff, Adam, 2008. "Fungibility and the impact of development assistance: evidence from Vietnam's health sector," Policy Research Working Paper Series 4800, The World Bank.
  8. Deininger, Klaus & Liu, Yanyan, 2009. "Economic and social impacts of self-help groups in India," Policy Research Working Paper Series 4884, The World Bank.
  9. Furukawa, Mitsuaki & Takahata, Junichiro, 2013. "Is GBS Still a Preferable Aid Modality?," Working Papers 50, JICA Research Institute.
  10. Prabal Roy Chowdhury & Jaideep Roy, 2011. "Aid in times of terror," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 11-08, Indian Statistical Institute, New Delhi, India.
  11. Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, Elsevier.
  12. Christopher Kilby, 2012. "Assessing the contribution of donor agencies to aid effectiveness: The impact of World Bank preparation on project outcomes," Villanova School of Business Department of Economics and Statistics Working Paper Series 20, Villanova School of Business Department of Economics and Statistics.
  13. Shi, Xinzheng, 2012. "Does an intra-household flypaper effect exist? Evidence from the educational fee reduction reform in rural China," Journal of Development Economics, Elsevier, vol. 99(2), pages 459-473.
  14. Channing Arndt & Sam Jones & Finn Tarp, 2011. "Aid Effectiveness: Opening the Black Box," Working Paper Series UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).
  15. Deininger, Klaus & Liu, Yanyan, 2009. "Longer-term economic impacts of self-help groups in india," Policy Research Working Paper Series 4886, The World Bank.
  16. Ravallion, Martin & Wagstaff, Adam, 2010. "The World Bank's publication record," Policy Research Working Paper Series 5374, The World Bank.
  17. Fernando Aragon, 2012. "Local Spending, Transfers and Costly Tax Collection," Discussion Papers dp12-09, Department of Economics, Simon Fraser University.
  18. David Cuberes & Kevin Tsui, 2011. "Aid and Fertility: What Does the Cross-Country Evidence Show?," Working Papers 2011024, The University of Sheffield, Department of Economics.

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