IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Selectivity on Aid Modality: Determinants of Budget Support from Multilateral Donors

  • Paul Clist
  • Alessia Isopi
  • Oliver Morrissey

Since the late 1990s a selection on policy approach to aid was advocated such that more aid should be allocated to countries with good policies. A number of donors accepted this recommendation, including the World Bank, but there is little evidence that this has occurred. Donors, including the World Bank, seem no more likely to use policy and governance indicators to determine the amount of aid allocated to particular recipients. This paper argues that donors may exercise selectivity over the aid modality. Specifically, multilateral donors (we consider only EC and WB) will cede more recipient control over aid by granting more budget support to those recipients with better service delivery systems and spending preferences (towards the poor) aligned with the donor. We test this for the EC and WB over 1997-2007 and find some support. The principal determinant of receiving budget support has been having a PRSP process in place, and this can be considered a good indicator of aligned preferences. Furthermore towards the end of the period (2005-07) there was some increase in the share of countries receiving budget support but then government effectiveness was also a determinant of eligibility, and having a PRSP increased the amount of budget support. Multilateral donors have been more likely to give budget support to countries with aligned spending preferences and better quality systems, even if they have not reallocated the total aid envelope in that way.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nottingham.ac.uk/credit/documents/papers/11-01.pdf
Download Restriction: no

Paper provided by University of Nottingham, CREDIT in its series Discussion Papers with number 11/01.

as
in new window

Length:
Date of creation:
Date of revision:
Handle: RePEc:not:notcre:11/01
Contact details of provider: Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
Phone: (44) 0115 951 5620
Fax: (0115) 951 4159
Web page: http://www.nottingham.ac.uk/economics/
More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Svensson, Jakob, 1997. "When is Foreign Aid Policy Credible? - Aid Dependence and Conditionality," Seminar Papers 600, Stockholm University, Institute for International Economic Studies.
  2. Izabela Jelovac & Frieda Vandeninden, 2008. "How should donors give foreign aid? Project aid versus budget support," Working Papers 0813, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  3. Spiros Bougheas & Indraneel Dasgupta & Oliver Morrissey, 2007. "Tough love or unconditional charity?," Oxford Economic Papers, Oxford University Press, vol. 59(4), pages 561-582, October.
  4. Giulio Federico, 2004. "Aid and Policies under Weak Donor Conditionality," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 13(3), pages 395-416, September.
  5. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
  6. Azam, Jean-Paul & Laffont, Jean-Jacques, 2003. "Contracting for aid," Journal of Development Economics, Elsevier, vol. 70(1), pages 25-58, February.
  7. Derek Headey, 2008. "Geopolitics and the effect of foreign aid on economic growth: 1970-2001," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(2), pages 161-180.
  8. Paul Collier & David Dollar, 2004. "Development effectiveness: what have we learnt?," Economic Journal, Royal Economic Society, vol. 114(496), pages F244-F271, 06.
  9. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
  10. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2001. "On the Empirics of Foreign Aid and Growth," EPRU Working Paper Series 03-13, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Sep 2003.
  11. Knack, Stephen & Eubank, Nicholas, 2009. "Aid and trust in country systems," Policy Research Working Paper Series 5005, The World Bank.
  12. Hefeker, Carsten, 2005. "Project Aid or Budget Aid? The Interests of Governments and Financial Institutions," Proceedings of the German Development Economics Conference, Kiel 2005 19, Verein für Socialpolitik, Research Committee Development Economics.
  13. Tito Cordella & Giovanni Dell'Ariccia, 2007. "Budget Support Versus Project Aid: A Theoretical Appraisal," Economic Journal, Royal Economic Society, vol. 117(523), pages 1260-1279, October.
  14. Mark McGillivray & Oliver Morrissey, 2000. "Aid fungibility in Assessing Aid: red herring or true concern?," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 413-428.
  15. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
  16. Paul Clist, . "25 Years of Aid Allocation Practice: Comparing Donors and Eras," Discussion Papers 09/11, University of Nottingham, CREDIT.
  17. Marcel Fafchamps & Bart Minten, 1999. "Relationships and traders in Madagascar," Journal of Development Studies, Taylor & Francis Journals, vol. 35(6), pages 1-35.
  18. Rune Jansen Hagen, 2006. "Buying Influence: Aid Fungibility in a Strategic Perspective," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 267-284, 05.
  19. Stefan Koeberle & Zoran Stavreski & Jan Walliser, 2006. "Budget Support as More Effective Aid? Recent Experiences and Emerging Lessons," World Bank Publications, The World Bank, number 6958, October.
  20. William Easterly, 2007. "Are aid agencies improving?," Economic Policy, CEPR;CES;MSH, vol. 22, pages 633-678, October.
  21. Paul Mosley & John Hudson & Arjan Verschoor, 2004. "Aid, Poverty Reduction and the 'New Conditionality'," Economic Journal, Royal Economic Society, vol. 114(496), pages F217-F243, 06.
  22. Kilby, Christopher, 2009. "The political economy of conditionality: An empirical analysis of World Bank loan disbursements," Journal of Development Economics, Elsevier, vol. 89(1), pages 51-61, May.
  23. Peter Nunnenkamp & Rainer Thiele, 2006. "Targeting Aid to the Needy and Deserving: Nothing But Promises?," The World Economy, Wiley Blackwell, vol. 29(9), pages 1177-1201, 09.
  24. Jones, Chris & Morrissey, Oliver & Nelson, Doug, 2011. "Did the World Bank Drive Tariff Reforms in Eastern Africa?," World Development, Elsevier, vol. 39(3), pages 324-335, March.
  25. Oecd, 2002. "Aid volume, channels and allocations for poverty reduction," OECD Journal on Development, OECD Publishing, vol. 3(3), pages 33-46.
  26. Gomanee, Karuna & Morrissey, Oliver & Mosley, Paul & Verschoor, Arjan, 2005. "Aid, Government Expenditure, and Aggregate Welfare," World Development, Elsevier, vol. 33(3), pages 355-370, March.
  27. Clist, Paul, 2011. "25Years of Aid Allocation Practice: Whither Selectivity?," World Development, Elsevier, vol. 39(10), pages 1724-1734.
  28. William Easterly, 2002. "The cartel of good intentions: The problem of bureaucracy in foreign aid," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 5(4), pages 223-250.
  29. Hagen, Rune Jansen, 2006. "Samaritan agents? On the strategic delegation of aid policy," Journal of Development Economics, Elsevier, vol. 79(1), pages 249-263, February.
  30. Howard White & Oliver Morrissey, 1997. "Conditionality When Donor And Recipient Preferences Vary," Journal of International Development, John Wiley & Sons, Ltd., vol. 9(4), pages 497-505.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:not:notcre:11/01. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hilary Hughes)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.