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Adapting Aid Allocation Criteria to Development Goals

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Listed author(s):
  • Patrick Guillaumont

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS - Université d'Auvergne - Clermont-Ferrand I)

Abstract

This paper analyzes aid allocation from a normative point of view. It attempts to design aid allocation criteria adapted to development goals and combining the principles of effectiveness and equity in a transparent and integrated framework. The common view about aid selectivity, which essentially refers to the quality of governance and policy indicators, is challenged for several reasons, in particular the weakness of the relationship between these indicators and aid effectiveness and the risk of countries facing exogeneous difficulties being left behind. Consistent with the lessons of the literature on aid effectiveness, new criteria for aid allocation are proposed, in particular that of structural vulnerability which has been shown to increase the marginal effectiveness of aid, because aid dampens its negative effects. Moreover, equity principles in aid allocation involve promoting equal opportunities (for economic growth and to reduce poverty), which means giving more aid to countries facing more severe structural handicaps. Thus a rational basis is given for allocating more aid to the LDCs (least developed countries), designated as low income countries suffering the most from structural handicaps. Using the Economic Vulnerability Index (EVI) set up for the identification of LDCs also leads to giving special attention to small and vulnerable countries which are not LDCs, and to fragile states as well.

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Paper provided by HAL in its series Working Papers with number halshs-00556806.

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Date of creation: 17 Jan 2011
Handle: RePEc:hal:wpaper:halshs-00556806
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Keywords: cerdi;

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Find related papers by JEL classification:
  • F35 - International Economics - - International Finance - - - Foreign Aid
  • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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  1. Jacky Amprou & Patrick Guillaumont & Sylviane Guillaumont Jeanneney, 2007. "Aid Selectivity According to Augmented Criteria," The World Economy, Wiley Blackwell, vol. 30(5), pages 733-763, 05.
  2. Edward Anderson & Hugh Waddington, 2007. "Aid and the Millennium Development Goal Poverty Target: How Much is Required and How Should it be Allocated?," Oxford Development Studies, Taylor & Francis Journals, vol. 35(1), pages 1-31.
  3. Daniel Kaufmann & Aart Kraay & Massimo Mastruzzi, 2003. "Governance Matters III: Governance Indicators for 1996-2002," Development and Comp Systems 0308001, EconWPA.
  4. McGillivray, Mark, 2004. "Descriptive and prescriptive analyses of aid allocation: Approaches, issues, and consequences," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 275-292.
  5. Collier, Paul & Dollar, David, 2001. "Can the World Cut Poverty in Half? How Policy Reform and Effective Aid Can Meet International Development Goals," World Development, Elsevier, vol. 29(11), pages 1787-1802, November.
  6. Sylviane GUILLAUMONT JEANNENEY & Patrick GUILLAUMONT, 2006. "Big Push versus Absorptive Capacity: How to Reconcile the Two Approaches," Working Papers 200614, CERDI.
  7. P. Guillaumont & L. Chauvet, 2001. "Aid and Performance: A Reassessment," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 66-92.
  8. Cogneau, Denis & Naudet, Jean-David, 2007. "Who Deserves Aid? Equality of Opportunity, International Aid, and Poverty Reduction," World Development, Elsevier, vol. 35(1), pages 104-120, January.
  9. Patrick GUILLAUMONT, 2007. "EVI and its Use. Design of an Economic Vulnerability Index and its Use for International Development Policy," Working Papers 200714, CERDI.
  10. R. Lensink & H. White, 2001. "Are There Negative Returns to Aid?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 42-65.
  11. Shantayanan Devarajan & David R. Dollar & Torgny Holmgren, 2001. "Aid and Reform in Africa : Lessons from Ten Case Studies," World Bank Publications, The World Bank, number 13894, June.
  12. Collier, Paul & Hoeffler, Anke, 2004. "Aid, policy and growth in post-conflict societies," European Economic Review, Elsevier, vol. 48(5), pages 1125-1145, October.
  13. McGillivray, Mark, 2006. "Aid Allocation and Fragile States," WIDER Working Paper Series DP2006/01, World Institute for Development Economic Research (UNU-WIDER).
  14. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
  15. repec:dau:papers:123456789/4461 is not listed on IDEAS
  16. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
  17. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2004. "On The Empirics of Foreign Aid and Growth," Economic Journal, Royal Economic Society, vol. 114(496), pages 191-216, 06.
  18. Llavador, Humberto G. & Roemer, John E., 2001. "An equal-opportunity approach to the allocation of international aid," Journal of Development Economics, Elsevier, vol. 64(1), pages 147-171, February.
  19. Patrick Guillaumont, 2007. "Aid Works Best in Vulnerable Countries," Post-Print hal-00192971, HAL.
  20. Collier, Paul & Guillaumont, Patrick & Guillaumont, Sylviane & Gunning, Jan Willem, 1997. "Redesigning conditionality," World Development, Elsevier, vol. 25(9), pages 1399-1407, September.
  21. François Bourguignon & Boris Pleskovic & André Sapir, 2005. "Annual World Bank Conference on Development Economics--Europe 2005 : Are We on Track to Achieve the Millennium Development Goals?," World Bank Publications, The World Bank, number 7381, June.
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Cited by:

  1. Jan Willem GUNNING, 2008. "Aid Effectiveness: Can It Be Improved?," Working Papers P02, FERDI.
  2. Patrick GUILLAUMONT & Sylviane GUILLAUMONT JEANNENEY, 2009. "Accounting for Vulnerability of African Countries in Performance Based Aid Allocation," Working Papers P08, FERDI.
  3. Alan Gelb, 2010. "How Can Donors Create Incentives for Results and Flexibility for Fragile States? A Proposal for IDA," Working Papers id:3233, eSocialSciences.
  4. Ha Hoang, 2014. "Aid darling and the European Union’s aid allocation policy: the case of Vietnam," Asia Europe Journal, Springer, vol. 12(3), pages 301-324, September.

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