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Aid E ectiveness in Times of Political Change: Lessons from the Post-Communist Transition

We argue that the tilt towards donor interests over recipient needs in aid allocation and practices may be particularly strong in new partnerships. Using the natural experiment of Eastern transition we find that commercial and strategic concerns influenced both aid flows and entry in the first half of the 1990s, but much less so later on. We also find that fractionalization increased and that early aid to the region was particularly volatile, unpredictable and tied. Our results may explain why aid to Iraq and Afghanistan has had little development impact and serve as warning for Burma and Arab Spring regimes.

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Paper provided by Stockholm Institute of Transition Economics, Stockholm School of Economics in its series SITE Working Paper Series with number 25.

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Length: 34 pages
Date of creation: 22 Oct 2013
Date of revision:
Handle: RePEc:hhs:hasite:0025
Contact details of provider: Postal: Stockholm Institute of Transition Economics, Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Phone: (+46 8) 736 9670
Fax: (+46 8) 31 64 22
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  1. Collier, Paul & Dollar, David, 1999. "Aid allocation and poverty reduction," Policy Research Working Paper Series 2041, The World Bank.
  2. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
  3. A. Javier Hamann & Ales Bulir, 2006. "Volatility of Development Aid: From the Frying Pan into the Fire?," IMF Working Papers 06/65, International Monetary Fund.
  4. Raghuram G. Rajan & Arvind Subramanian, 2005. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," NBER Working Papers 11513, National Bureau of Economic Research, Inc.
  5. Axel Dreher & Jan-Egbert Sturm & James Raymond Vreeland, 2007. "Development Aid and International Politics: Does membership on the UN Security Council influence World Bank decisions?," KOF Working papers 07-171, KOF Swiss Economic Institute, ETH Zurich.
  6. Maizels, Alfred & Nissanke, Machiko K., 1984. "Motivations for aid to developing countries," World Development, Elsevier, vol. 12(9), pages 879-900, September.
  7. Berthelemy, Jean-Claude & Tichit, Ariane, 2002. "Bilateral Donors' Aid Allocation Decisions: A Three-dimensional Panel Analysis," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  8. Alesina, Alberto & Dollar, David, 2000. " Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
  9. Frot, Emmanuel & Santiso, Javier, 2009. "Herding in Aid Allocation," SITE Working Paper Series 5, Stockholm Institute of Transition Economics, Stockholm School of Economics, revised 02 Oct 2009.
  10. Knack, Stephen & Rogers, F. Halsey & Eubank, Nicholas, 2010. "Aid quality and donor rankings," Policy Research Working Paper Series 5290, The World Bank.
  11. Joao Santos Silva & Silvana Tenreyro, 2005. "The log of gravity," LSE Research Online Documents on Economics 3744, London School of Economics and Political Science, LSE Library.
  12. Jac C. Heckelman, 2010. "Aid and Democratization in the Transition Economies," Kyklos, Wiley Blackwell, vol. 63(4), pages 558-579, November.
  13. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  14. Easterly, William & Williamson, Claudia R., 2011. "Rhetoric versus Reality: The Best and Worst of Aid Agency Practices," World Development, Elsevier, vol. 39(11), pages 1930-1949.
  15. Knack,Stephen & Rahman, Aminur, 2004. "Donor fragmentation and bureaucratic quality in aid recipients," Policy Research Working Paper Series 3186, The World Bank.
  16. Anne Boschini & Anders Olofsg�rd, 2007. "Foreign aid: An instrument for fighting communism?," Journal of Development Studies, Taylor & Francis Journals, vol. 43(4), pages 622-648.
  17. Ilyana Kuziemko & Eric Werker, 2006. "How Much Is a Seat on the Security Council Worth? Foreign Aid and Bribery at the United Nations," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 905-930, October.
  18. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
  19. Oecd, 2002. "Aid volume, channels and allocations for poverty reduction," OECD Journal on Development, OECD Publishing, vol. 3(3), pages 33-46.
  20. Robert K. Fleck & Christopher Kilby, 2009. "Changing Aid Regimes? U.S. Foreign Aid from the Cold War to the War on Terror," Villanova School of Business Department of Economics and Statistics Working Paper Series 1, Villanova School of Business Department of Economics and Statistics.
  21. Knack, Stephen & Eubank, Nicholas, 2009. "Aid and trust in country systems," Policy Research Working Paper Series 5005, The World Bank.
  22. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  23. Oecd, 2009. "2009 OECD Report on Division of Labour," OECD Journal on Development, OECD Publishing, vol. 10(4), pages 7-58.
  24. Ai, Chunrong & Norton, Edward C., 2000. "Standard errors for the retransformation problem with heteroscedasticity," Journal of Health Economics, Elsevier, vol. 19(5), pages 697-718, September.
  25. Frot, Emmanuel, 2009. "Early vs. Late in Aid Partnerships and Implications for Tackling Aid Fragmentation," SITE Working Paper Series 1, Stockholm Institute of Transition Economics, Stockholm School of Economics.
  26. Frot, Emmanuel & Perrotta, Maria, 2009. "Aid Eff ectiveness: New Instrument, New Results?," SITE Working Paper Series 11, Stockholm Institute of Transition Economics, Stockholm School of Economics.
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