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Aid quality and donor rankings

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  • Knack, Stephen
  • Rogers, F. Halsey
  • Eubank, Nicholas

Abstract

This paper offers new measures of aid quality covering 38 bilateral and multilateral donors, as well as new insights about the robustness and usefulness of such measures. The 2005 Paris Declaration on Aid Effectiveness and the follow-up 2008 Accra Agenda for Action have focused attention on common donor practices that reduce the development impact of aid. Using 18 underlying indicators that capture these practices -- derived from the OECD-DAC's Survey for Monitoring the Paris Declaration, the new AidData database, and the DAC aid tables -- the authors construct an overall aid quality index and four coherently defined sub-indexes on aid selectivity, alignment, harmonization, and specialization. Compared with earlier indicators used in donor rankings, this indicator set is more comprehensive and representative of the range of donor practices addressed in the Paris Declaration, improving the validity, reliability, and robustness of rankings. One of the innovations is to increase the validity of the aid quality indicators by adjusting for recipient characteristics, donor aid volumes, and other factors. Despite these improvements in data and methodology, the authors caution against overinterpretation on overall indexes such as these. Alternative plausible assumptions regarding weights or the inclusion of additional indicators can still produce marked shifts in the ranking of some donors, so that small differences in overall rankings are not meaningful. Moreover, because the performance of some donors varies considerably across the four sub-indexes, these sub-indexes may be more useful than the overall index in identifying donors’ relative strengths and weaknesses.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5290.

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Date of creation: 01 May 2010
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Handle: RePEc:wbk:wbrwps:5290

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Keywords: Gender and Health; Development Economics&Aid Effectiveness; Economic Adjustment and Lending; Disability; Poverty Monitoring&Analysis;

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  1. Jeremy Bulow & Kenneth Rogoff, 2005. "Grants versus Loans for Development Banks," American Economic Review, American Economic Association, vol. 95(2), pages 393-397, May.
  2. Annen Kurt & Kosempel Stephen, 2009. "Foreign Aid, Donor Fragmentation, and Economic Growth," The B.E. Journal of Macroeconomics, De Gruyter, De Gruyter, vol. 9(1), pages 1-32, August.
  3. Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398.
  4. 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, vol. 42(1), pages 1-21.
  5. Dollar, David & Levin, Victoria, 2006. "The Increasing Selectivity of Foreign Aid, 1984-2003," World Development, Elsevier, vol. 34(12), pages 2034-2046, December.
  6. Christopher Kilby, 2010. "What Determines the Size of Aid Projects?," Villanova School of Business Department of Economics and Statistics Working Paper Series, Villanova School of Business Department of Economics and Statistics 10, Villanova School of Business Department of Economics and Statistics.
  7. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
  8. William Easterly, 2007. "Are aid agencies improving?," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 22, pages 633-678, October.
  9. Mosley, Paul, 1985. "The Political Economy of Foreign Aid: A Model of the Market for a Public Good," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 373-93, January.
  10. William Easterly & Ross Levine & David Roodman, 2004. "Aid, Policies, and Growth: Comment," American Economic Review, American Economic Association, vol. 94(3), pages 774-780, June.
  11. Knack, Stephen & Rahman, Aminur, 2007. "Donor fragmentation and bureaucratic quality in aid recipients," Journal of Development Economics, Elsevier, vol. 83(1), pages 176-197, May.
  12. Knack, Stephen & Rogers, F. Halsey & Eubank, Nicholas, 2010. "Aid quality and donor rankings," Policy Research Working Paper Series 5290, The World Bank.
  13. William Easterly & Ross Levine & David Roodman, 2003. "New Data, New doubts: A Comment on Burnside and Dollar's "Aid, Policies, and Growth" (2000)," NBER Working Papers 9846, National Bureau of Economic Research, Inc.
  14. Knack, Stephen & Eubank, Nicholas, 2009. "Aid and trust in country systems," Policy Research Working Paper Series 5005, The World Bank.
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