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Rhetoric versus reality: the best and worst of aid agency practices

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  • Easterly, William
  • Williamson, Claudia R.

Abstract

Foreign aid critics, supporters, recipients, and donors have produced eloquent rhetoric on the need for better aid practices— has this translated into reality? This paper attempts to monitor the best and worst of aid practices among bilateral, multilateral, and UN agencies. We create aid practice measures based on aid transparency, specialization, selectivity, ineffective aid channels, and overhead costs. We rate donor agencies from best to worst on aid practices. We find that the UK does well among bilateral agencies, the US is below average, and Scandinavian donors do surprisingly poorly. The biggest difference is between the UN agencies, who mostly rank in the bottom half of donors, and everyone else. Average performance of all agencies on transparency, fragmentation, and selectivity is still very poor. The paper also assesses trends in best practices over time—we find modest improvement in transparency and more in moving away from ineffective channels. However, we find no evidence of improvements (and partial evidence of worsening) in specialization, fragmentation, and selectivity, despite escalating rhetoric to the contrary.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39139.

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Date of creation: 2011
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Publication status: Published in World Development 11.39(2011): pp. 1930-1949
Handle: RePEc:pra:mprapa:39139

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Keywords: foreign aid; best practices; transparency; bureaucracy; incentives;

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  1. William Easterly, 2007. "Are aid agencies improving?," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 22, pages 633-678, October.
  2. José Cheibub & Jennifer Gandhi & James Vreeland, 2010. "Democracy and dictatorship revisited," Public Choice, Springer, Springer, vol. 143(1), pages 67-101, April.
  3. Harold J. Brumm, 2003. "Aid, Policies, and Growth: Bauer Was Right," Cato Journal, Cato Journal, Cato Institute, Cato Journal, Cato Institute, vol. 23(2), pages 167-174, Fall.
  4. Torsten Persson & Guido Tabellini, 2006. "Democracy and Development: The Devil in the Details," Working Papers 302, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  5. Svensson, Jakob, 2000. "Foreign aid and rent-seeking," Journal of International Economics, Elsevier, Elsevier, vol. 51(2), pages 437-461, August.
  6. Martens,Bertin & Mummert,Uwe & Murrell,Peter & Seabright,Paul, 2002. "The Institutional Economics of Foreign Aid," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521808187.
  7. Simeon Djankov & José G. Montalvo & Marta Reynal-Querol, 2005. "The curse of aid," Working Papers 257, Barcelona Graduate School of Economics.
  8. Claudia R. Williamson, 2008. "Foreign Aid and Human Development: The Impact of Foreign Aid to the Health Sector," Southern Economic Journal, Southern Economic Association, vol. 75(1), pages 188-207, July.
  9. Jac C. Heckelman & Stephen Knack, 2008. "Foreign Aid and Market-Liberalizing Reform," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 75(299), pages 524-548, 08.
  10. Daron Acemoglu & Simon Johnson & James Robinson & Pierre Yared, 2005. "Income and Democracy," NBER Working Papers 11205, National Bureau of Economic Research, Inc.
  11. Knack, Stephen & Rahman, Aminur, 2007. "Donor fragmentation and bureaucratic quality in aid recipients," Journal of Development Economics, Elsevier, Elsevier, vol. 83(1), pages 176-197, May.
  12. Dollar, David & Levin, Victoria, 2006. "The Increasing Selectivity of Foreign Aid, 1984-2003," World Development, Elsevier, Elsevier, vol. 34(12), pages 2034-2046, December.
  13. Emmanuel Frot & Javier Santiso, 2008. "Development Aid and Portfolio Funds: Trends, Volatility and Fragmentation," OECD Development Centre Working Papers 275, OECD Publishing.
  14. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, Elsevier, vol. 40(2), pages 289-329, February.
  15. Simeon Djankov & Jose G. Montalvo & Marta Reynal-Querol, 2006. "Does Foreign Aid Help," Cato Journal, Cato Journal, Cato Institute, Cato Journal, Cato Institute, vol. 26(1), pages 1-28, Winter.
  16. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, Elsevier, vol. 46(8), pages 1475-1500, September.
  17. World Bank & International Monetary Fund, 2010. "Global Monitoring Report 2010 : The MDGs after the Crisis," World Bank Publications, The World Bank, number 2444, August.
  18. 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.
  19. Knack, Stephen & Rogers, F. Halsey & Eubank, Nicholas, 2011. "Aid Quality and Donor Rankings," World Development, Elsevier, Elsevier, vol. 39(11), pages 1907-1917.
  20. Brautigam, Deborah A & Knack, Stephen, 2004. "Foreign Aid, Institutions, and Governance in Sub-Saharan Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 52(2), pages 255-85, January.
  21. Stephen Knack, 2001. "Aid Dependence and the Quality of Governance: Cross-Country Empirical Tests," Southern Economic Journal, Southern Economic Association, vol. 68(2), pages 310-329, October.
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Cited by:
  1. Olofsgård, Anders & Perrotta, Maria & Frot, Emmanuel, 2013. "Aid E ectiveness in Times of Political Change: Lessons from the Post-Communist Transition," SITE Working Paper Series 25, Stockholm Institute of Transition Economics, Stockholm School of Economics.
  2. Zohid Askarov & Hristos Doucouliagos, 2014. "Development Aid and Growth in Transition Economies," Economics Series 2014_5, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  3. Kablan, Sandrine, 2013. "Foreign aid, green cities and buildings," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  4. Fuchs, Andreas & Vadlamannati, Krishna Chaitanya, 2013. "The Needy Donor: An Empirical Analysis of India’s Aid Motives," World Development, Elsevier, Elsevier, vol. 44(C), pages 110-128.
  5. Andrew McNee, 2012. "Rethinking Health Sector Wide Approaches through the lens of Aid Effectiveness," Development Policy Centre Discussion Papers, Development Policy Centre, Crawford School of Public Policy, The Australian National University 1214, Development Policy Centre, Crawford School of Public Policy, The Australian National University.
  6. Jones, Kelly M., 2011. "Evaluating the Mexico city policy: How US foreign policy affects fertility outcomes and child health in Ghana," IFPRI discussion papers, International Food Policy Research Institute (IFPRI) 1147, International Food Policy Research Institute (IFPRI).
  7. Zohid Askarov & Hristos Doucouliagos, 2013. "Does aid improve democracy and governance? A meta-regression analysis," Public Choice, Springer, Springer, vol. 157(3), pages 601-628, December.
  8. Kurt Annen & Luc Moers, 2012. "Donor Competition for Aid Impact, and Aid Fragmentation," IMF Working Papers 12/204, International Monetary Fund.
  9. Andreas Fuchs & Axel Dreher & Peter Nunnenkamp, 2012. "Determinants of Donor Generosity: A Survey of the Aid Budget Literature," Kiel Working Papers 1789, Kiel Institute for the World Economy.
  10. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D. & Stephan Klasen & Florian Johannsen, 2013. "Does German Development Aid Promote German Exports and German Employment? A Sectoral-Level Analysis," Ibero America Institute for Econ. Research (IAI) Discussion Papers 227, Ibero-America Institute for Economic Research, revised 18 Dec 2013.

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