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Crushed Aid: Fragmentation in Sectoral Aid

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  • Emmanuel Frot
  • Javier Santiso

Abstract

This paper measures and compares fragmentation in aid sectors. Past studies focused on aggregate country data but a sector analysis provides a better picture of fragmentation. We start by counting the number of aid projects in the developing world and find that, in 2007, more than 90 000 projects were running simultaneously. Project proliferation is on a steep upward trend and will certainly be reinforced by the emergence of new donors. Developing countries with the largest numbers of aid projects have more than 2 000 in a single year. In parallel to this boom of aid projects, there has been a major shift towards social sectors and, as a consequence, these are the most fragmented. We quantify fragmentation in each aid sector for donors and recipients and identify which exhibit the highest fragmentation. While fragmentation is usually seen as an issue when it is excessive, we also show that some countries suffer from too little fragmentation. An original contribution of this paper is to develop a monopoly index that identifies countries where a donor enjoys monopoly power. Finally, we characterise countries with high fragmentation levels. Countries that are poor, democratic and have a large population get more fragmented aid. However, this is only because poor and democratic countries attract more donors. Once we control for the number of donors in a country-sector, democratic countries do not appear different from non-democratic ones in any sector and poor countries actually have a slightly less fragmented aid allocation. Cet article mesure et compare le niveau de fragmentation de l’aide au développement dans différents secteurs d’allocation. Les précédents travaux consacrés au sujet se limitaient à l’analyse de données agrégées au niveau national. Une décomposition sectorielle permet d’appréhender plus précisément le phénomène de fragmentation. On évalue à plus de 90 000 le nombre de projets financés par l’aide en 2007. Cette prolifération est en constante augmentation, et sera certainement renforcée par l’émergence de nouveaux pays donneurs. Les pays en développement qui sont le siège du plus grand nombre de projets en accueillent plus de 2000 par an. Parallèlement à cette explosion du nombre de projets, l’allocation sectorielle de l’aide a été modifiée, avec de plus en plus de projets dans les secteurs à buts sociaux. En conséquence, ces secteurs sont les plus fragmentés. Nous quantifions cette fragmentation pour les pays donneurs et récipiendaires, et établissons une liste de ceux où elle est la plus élevée. Nous étudions aussi le revers du problème de la fragmentation de l’aide : tandis que celle-ci est généralement considérée comme problématique lorsqu’elle est trop élevée, nous montrons que certains pays souffrent de trop peu de fragmentation. Nous créons un indice afin d’identifier les pays en développement où un donneur bénéficie d’une position de monopole. La dernière partie de l’article s’attache à caractériser les pays qui ont des niveaux de fragmentation élevés. Les pays pauvres, démocratiques et avec une importante population, reçoivent une aide plus fragmentée. Mais ces résultats s’expliquent par le fait que les pays pauvres et démocratiques attirent aussi plus de donneurs. Une fois que nous prenons cet effet en compte, il apparaît que le niveau de démocratie n’influence pas la fragmentation de l’aide, et que l’aide aux pays pauvres est en fait légèrement moins fragmentée.

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File URL: http://dx.doi.org/10.1787/218465127786
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 284.

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Date of creation: 05 Jan 2010
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Handle: RePEc:oec:devaaa:284-en

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Keywords: aid; fragmentation; fragmentation; aide;

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References

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  1. William Easterly, 2008. "Can the West Save Africa?," NBER Working Papers 14363, National Bureau of Economic Research, Inc.
  2. Knack, Stephen & Rahman, Aminur, 2004. "Donor fragmentation and bureaucratic quality in aid recipients," Policy Research Working Paper Series 3186, The World Bank.
  3. Djankov, Simeon & Montalvo, Jose G. & Reynal-Querol, Marta, 2009. "Aid with multiple personalities," Journal of Comparative Economics, Elsevier, vol. 37(2), pages 217-229, June.
  4. Emmanuel Frot & Javier Santiso, 2008. "Development Aid and Portfolio Funds: Trends, Volatility and Fragmentation," OECD Development Centre Working Papers 275, OECD Publishing.
  5. William Easterly & Tobias Pfutze, 2008. "Where Does the Money Go? Best and Worst Practices in Foreign Aid," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 22(2), pages 29-52, Spring.
  6. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  7. Arnab Acharya & Ana Teresa Fuzzo de Lima & Mick Moore, 2006. "Proliferation and fragmentation: Transactions costs and the value of aid," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 42(1), pages 1-21.
  8. Eduardo Borensztein & Julia Cagé & Daniel Cohen & Cécile Valadier, 2008. "Aid Volatility and Macro Risks in Low-Income Countries," OECD Development Centre Working Papers 273, OECD Publishing.
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Cited by:
  1. Acharya, Arnab & Alvarez, Melisa Mart.nez, 2012. "Aid Effectiveness in the Health Sector," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  2. Leiderer, Stefan, 2013. "Donor coordination for effective government policies? Implementation of the new aid effectiveness agenda in health and education in Zambia," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  3. Knack, Stephen & Smets, Lodewijk, 2013. "Aid Tying and Donor Fragmentation," World Development, Elsevier, Elsevier, vol. 44(C), pages 63-76.
  4. Gomez-Echeverri, Luis, 2013. "Foreign aid and sustainable energy," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  5. Kilby, Christopher, 2011. "What Determines the Size of Aid Projects?," World Development, Elsevier, Elsevier, vol. 39(11), pages 1981-1994.
  6. Wim Naudé, 2011. "Foreign Aid for Innovation: The Missing Ingredient in Private Sector Development?," Working Papers, Maastricht School of Management 2011/35, Maastricht School of Management.
  7. Masaki, Takaaki & van de Walle, Nicolas, 2014. "The impact of democracy on economic growth in sub-Saharan Africa, 1982-2012," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  8. Amanda Glassman, Denizhan Duran, 2012. " An Index of the Quality of Official Development Assistance in Health - Working Paper 287," Working Papers, Center for Global Development 287, Center for Global Development.

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