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What is effective aid? How would donors allocate It?

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Author Info
Kenny, Charles

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Abstract

There are significant weaknesses in some of the traditional justifications for assuming that aid will foster development. This paper looks at what the cross-country aid effectiveness literature and World Bank Operations Evaluation Department reviews have suggested about effective aid, first in terms of promoting income growth, and then for promoting other goals. This review forms the basis for a discussion of recommendations to improve aid effectiveness and a discussion of effective aid allocation. Given the multiple potential objectives for aid, there is no one right answer. However, it appears that there are a number of reforms to aid practices and distribution that might help to deliver a more significant return to aid resources. We should provide aid where institutions are already strong, where they can be strengthened with the help of donor resources, or where they can be bypassed with limited damage to existing institutional capacity. The importance of institutions to aid outcomes, as well as the fungibility of aid flows, suggests that programmatic aid should be expanded in countries with strong institutions, while project aid should be supported based on its ability to transfer knowledge and test new practices and support global public good provision rather than (merely) as a tool of financial resource transfer. The importance of institutions also suggests that we should be cautious in our expectations regarding the results of increased aid flows.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4005.

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Date of creation: 01 Sep 2006
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Handle: RePEc:wbk:wbrwps:4005

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Related research
Keywords: Development Economics&Aid Effectiveness; Banks&Banking Reform; School Health; Population Policies; Economic Theory&Research;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
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  1. van de Walle, Dominique & Cratty, Dorothyjean, 2005. "Do donors get what they paid for? micro evidence on the fungibility of development project aid," Policy Research Working Paper Series 3542, The World Bank. [Downloadable!]
  2. David Roodman, 2004. "The Anarchy of Numbers: Aid, Development, and Cross-country Empirics," Development and Comp Systems 0412003, EconWPA. [Downloadable!]
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  3. Knack, Stephen & Rahman, Aminur, 2004. "Donor fragmentation and bureaucratic quality in aid recipients," Policy Research Working Paper Series 3186, The World Bank. [Downloadable!]
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  4. Przeworski, Adam & Vreeland, James Raymond, 2000. "The effect of IMF programs on economic growth," Journal of Development Economics, Elsevier, vol. 62(2), pages 385-421, August. [Downloadable!] (restricted)
  5. Todd Moss, 2005. "Ten Myths of the International Finance Facility," Working Papers 60, Center for Global Development. [Downloadable!]
  6. Karuna Gomanee & Sourafel Girma & Oliver Morrissey, 2005. "Aid and growth in Sub-Saharan Africa: accounting for transmission mechanisms," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(8), pages 1055-1075. [Downloadable!]
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  7. Michael A. Clemens & Charles J. Kenny & Todd J. Moss, 2004. "The Trouble with the MDGs: Confronting Expectations of Aid and Development Success," Working Papers 40, Center for Global Development. [Downloadable!]
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  8. Wane, Waly, 2004. "The quality of foreign aid : country selectivity or donors incentives?," Policy Research Working Paper Series 3325, The World Bank. [Downloadable!]
  9. 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.
  10. Butkiewicz, James L. & Yanikkaya, Halit, 2005. "The Effects of IMF and World Bank Lending on Long-Run Economic Growth: An Empirical Analysis," World Development, Elsevier, vol. 33(3), pages 371-391, March. [Downloadable!] (restricted)
  11. Nicolas Depetris Chauvin & Aart Kraay, 2005. "What Has 100 Billion Dollars Worth of Debt Relief Done for Low- Income Countries?," International Finance 0510001, EconWPA. [Downloadable!]
  12. Raghuram Rajan & Arvind Subramanian, 2005. "What Undermines Aid's Impact on Growth?," IMF Working Papers 05/126, International Monetary Fund. [Downloadable!]
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  13. Hristos Doucouliagos & Martin Paldam, 2005. "Aid Effectiveness on Accumulation. A Meta Study," Economics Working Papers 2005-12, School of Economics and Management, University of Aarhus. [Downloadable!]
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  14. Lucia Hanmer & Robert Lensink & Howard White, 2003. "Infant and child mortality in developing countries: Analysing the data for Robust determinants," The Journal of Development Studies, Taylor and Francis Journals, vol. 40(1), pages 101-118, January. [Downloadable!] (restricted)
  15. Coviello, Decio & Islam, Roumeen, 2006. "Does aid help improve economic institutions ?," Policy Research Working Paper Series 3990, The World Bank. [Downloadable!]
  16. Raghuram Rajan & Arvind Subramanian, 2005. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," IMF Working Papers 05/127, International Monetary Fund. [Downloadable!]
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Full references

Cited by:
(explanations, 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.)

  1. Bernard Walters, 2007. "The Fiscal Implications of Scaling up ODA to Deal with the HIV/AIDS Pandemic," Conference Paper 3, International Policy Centre for Inclusive Growth. [Downloadable!]
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