Do donors get what they paid for? micro evidence on the fungibility of development project aid
AbstractRecipient government responses to development project aid have typically been studied at high levels of aggregation, using cross-country comparisons and/or aggregate time series data. Yet increasingly the relevant decisions are being made at the local level, in response to specific community-level projects. The authors use local-level data to test for fungibility of World Bank financing of rural road rehabilitation targeted to specific geographic areas of Vietnam. A simple double difference estimate suggests that the project's net contribution to rehabilitated road increments is close to zero, suggesting complete displacement of funding. However, with better controls for the endogeneity of project placement the authors find much less evidence of fungibility, with displacement accounting for around one-third of the aid. The results point to the importance ofdealing with selection bias in assessing project aid fungibility.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 3542.
Date of creation: 01 Mar 2005
Date of revision:
Housing&Human Habitats; Roads&Highways; ICT Policy and Strategies; Health Economics&Finance; Poverty Monitoring&Analysis;
This paper has been announced in the following NEP Reports:
- NEP-AFR-2005-12-14 (Africa)
- NEP-ALL-2005-12-14 (All new papers)
- NEP-DEV-2005-12-14 (Development)
- NEP-TRA-2005-12-14 (Transition Economics)
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