When instability increases the effectiveness of aid projects
AbstractThis paper assesses the effect of economic instability on the success of the projects funded by the World Bank, using the outcome of the projects, which is a notation of their overall success determined by the Independent Evaluation Group. It has been argued in macro economic studies that aid effectiveness is higher in vulnerable countries, because it dampens the negative effects of shocks. We show that this finding is not inconsistent with the observation that the success of the projects is lower in an unstable environment. Indeed instability, in particular the instability of exports, harms aid projects as it harms the rest of the economy, while the success of projects decreases when the total amount of aid received increases, due to absorptive capacity limitations. However this decrease is slower when instability is higher, showing a positive effect of aid through its stabilizing impact. We find the same results keeping only the projects funded by non concessionary loans, which suggests that the cushioning effect of aid extends not only to aid funded projects but to whole sets of projects. Corroborating macro economic findings, our results lead to the same conclusion that more aid should be allocated to more vulnerable countries, in spite of the lower success of the projects in an unstable environment: project evaluations cannot include the macro-stabilizing effect of the aid delivered through projects.
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Bibliographic InfoPaper provided by HAL in its series Working Papers with number halshs-00557176.
Date of creation: 18 Jan 2011
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Other versions of this item:
- Guillaumont, Patrick & Laajaj, Rachid, 2006. "When instability increases the effectiveness of aid projects," Policy Research Working Paper Series 4034, The World Bank.
- Rachid LAAJAJ & Patrick GUILLAUMONT, 2006. "When instability increases the effectiveness of aid projects," Working Papers 200637, CERDI.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Agenor, Pierre-Richard, 2001. "Business cycles, economic crises, and the poor : testing for asymmetric effects," Policy Research Working Paper Series 2700, The World Bank.
- Sylviane GUILLAUMONT JEANNENEY & Patrick GUILLAUMONT & Jacky AMPROU, 2005.
"Aid Selectivity According to Augmented Criteria,"
- Sylviane GUILLAUMONT JEANNENEY & Patrick GUILLAUMONT & Jacky AMPROU, 2006. "Aid Selectivity According to Augmented Criteria," Working Papers 200616, CERDI.
- Patrick Guillaumont & Sylviane Guillaumont Jeanneney & Jacky Amprou, 2011. "Aid Selectivity According to Augmented Criteria," Working Papers halshs-00562658, HAL.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:CitEc Project, subscribe to its RSS feed for this item.
- Limodio, Nicola, 2011. "The success of infrastructure projects in low-income countries and the role of selectivity," Policy Research Working Paper Series 5694, The World Bank.
- Kraay, Aart & Kraay, Aart & Murrell, Peter, 2013.
Policy Research Working Paper Series
6488, The World Bank.
- Denizer, Cevdet & Kaufmann, Daniel & Kraay, Aart, 2011. "Good countries or good projects ? macro and micro correlates of World Bank project performance," Policy Research Working Paper Series 5646, The World Bank.
- Guillaumont, Patrick, 2008. "An Economic Vulnerability Index: Its Design and Use for International Development Policy," Working Paper Series RP2008/99, World Institute for Development Economic Research (UNU-WIDER).
- Patrick Guillaumont, 2011. "Aid effectiveness for poverty reduction:macroeconomic overview and emerging issues," Working Papers halshs-00554285, HAL.
- Maelan Le Goff & Kangni Kpodar, 2011. "Do Remittances Reduce Aid Dependency?," IMF Working Papers 11/246, International Monetary Fund.
- Patrick Guillaumont, 2010. "Assessing the Economic Vulnerability of Small Island Developing States and the Least Developed Countries," Working Papers id:2625, eSocialSciences.
- Laura Metzger & Isabel Günther, 2013. "Analyzing Effectiveness of Development Aid Projects: Evaluation Ratings or Project Indicators?," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 154, Courant Research Centre PEG.
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