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Crushed Aid: Fragmentation in Sectoral Aid

Author

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  • Emmanuel Frot

    (Stockholm Institute of Transition Economics)

  • Javier Santiso

    (OECD)

Abstract

This paper measures and compares fragmentation in aid sectors. Past studies focused on aggregate country data but a sector analysis provides a better picture of fragmentation. We start by counting the number of aid projects in the developing world and find that, in 2007, more than 90 000 projects were running simultaneously. Project proliferation is on a steep upward trend and will certainly be reinforced by the emergence of new donors. Developing countries with the largest numbers of aid projects have more than 2 000 in a single year. In parallel to this boom of aid projects, there has been a major shift towards social sectors and, as a consequence, these are the most fragmented. We quantify fragmentation in each aid sector for donors and recipients and identify which exhibit the highest fragmentation. While fragmentation is usually seen as an issue when it is excessive, we also show that some countries suffer from too little fragmentation. An original contribution of this paper is to develop a monopoly index that identifies countries where a donor enjoys monopoly power. Finally, we characterise countries with high fragmentation levels. Countries that are poor, democratic and have a large population get more fragmented aid. However, this is only because poor and democratic countries attract more donors. Once we control for the number of donors in a country-sector, democratic countries do not appear different from non-democratic ones in any sector and poor countries actually have a slightly less fragmented aid allocation. Cet article mesure et compare le niveau de fragmentation de l’aide au développement dans différents secteurs d’allocation. Les précédents travaux consacrés au sujet se limitaient à l’analyse de données agrégées au niveau national. Une décomposition sectorielle permet d’appréhender plus précisément le phénomène de fragmentation. On évalue à plus de 90 000 le nombre de projets financés par l’aide en 2007. Cette prolifération est en constante augmentation, et sera certainement renforcée par l’émergence de nouveaux pays donneurs. Les pays en développement qui sont le siège du plus grand nombre de projets en accueillent plus de 2000 par an. Parallèlement à cette explosion du nombre de projets, l’allocation sectorielle de l’aide a été modifiée, avec de plus en plus de projets dans les secteurs à buts sociaux. En conséquence, ces secteurs sont les plus fragmentés. Nous quantifions cette fragmentation pour les pays donneurs et récipiendaires, et établissons une liste de ceux où elle est la plus élevée. Nous étudions aussi le revers du problème de la fragmentation de l’aide : tandis que celle-ci est généralement considérée comme problématique lorsqu’elle est trop élevée, nous montrons que certains pays souffrent de trop peu de fragmentation. Nous créons un indice afin d’identifier les pays en développement où un donneur bénéficie d’une position de monopole. La dernière partie de l’article s’attache à caractériser les pays qui ont des niveaux de fragmentation élevés. Les pays pauvres, démocratiques et avec une importante population, reçoivent une aide plus fragmentée. Mais ces résultats s’expliquent par le fait que les pays pauvres et démocratiques attirent aussi plus de donneurs. Une fois que nous prenons cet effet en compte, il apparaît que le niveau de démocratie n’influence pas la fragmentation de l’aide, et que l’aide aux pays pauvres est en fait légèrement moins fragmentée.

Suggested Citation

  • Emmanuel Frot & Javier Santiso, 2010. "Crushed Aid: Fragmentation in Sectoral Aid," OECD Development Centre Working Papers 284, OECD Publishing.
  • Handle: RePEc:oec:devaaa:284-en
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    File URL: http://dx.doi.org/10.1787/218465127786
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    References listed on IDEAS

    as
    1. Djankov, Simeon & Montalvo, Jose G. & Reynal-Querol, Marta, 2009. "Aid with multiple personalities," Journal of Comparative Economics, Elsevier, vol. 37(2), pages 217-229, June.
    2. 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.
    3. William Easterly, 2009. "Can the West Save Africa?," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 373-447, June.
    4. Emmanuel Frot & Javier Santiso, 2008. "Development Aid and Portfolio Funds: Trends, Volatility and Fragmentation," OECD Development Centre Working Papers 275, OECD Publishing.
    5. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    6. William Easterly & Tobias Pfutze, 2008. "Where Does the Money Go? Best and Worst Practices in Foreign Aid," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 29-52, Spring.
    7. 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.
    8. Eduardo Borensztein & Julia Cagé & Daniel Cohen & Cécile Valadier, 2008. "Aid Volatility and Macro Risks in Low-Income Countries," OECD Development Centre Working Papers 273, OECD Publishing.
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    Cited by:

    1. Leiderer, Stefan, 2013. "Donor Coordination for Effective Government Policies? Implementation of the New Aid Effectiveness Agenda in Health and Education in Zambia," WIDER Working Paper Series 049, World Institute for Development Economic Research (UNU-WIDER).
    2. Furukawa, Mitsuaki & Mikami, Satoru, 2014. "Is Country-system-based Aid Really Better than Project-based Aid? Evidence from Rural Water Supply Management in Uganda," Working Papers 64, JICA Research Institute.
    3. Wim Naudé, 2011. "Foreign Aid for Innovation: The Missing Ingredient in Private Sector Development?," Working Papers 2011/35, Maastricht School of Management.
    4. Kilama, Eric Gabin, 2016. "The influence of China and emerging donors aid allocation: A recipient perspective," China Economic Review, Elsevier, vol. 38(C), pages 76-91.
    5. Auriol, Emmanuelle & Miquel-Florensa, Josepa, 2015. "Taxing Fragmented Aid to Improve Aid efficiency," TSE Working Papers 15-600, Toulouse School of Economics (TSE).
    6. Masaki, Takaaki & van de Walle, Nicolas, 2014. "The impact of democracy on economic growth in sub-Saharan Africa, 1982-2012," WIDER Working Paper Series 057, World Institute for Development Economic Research (UNU-WIDER).
    7. Gómez-Echeverri, Luis, 2013. "Foreign Aid and Sustainable Energy," WIDER Working Paper Series 093, World Institute for Development Economic Research (UNU-WIDER).
    8. Peter Nunnenkamp & Rainer Thiele, 2013. "Financing for Development: The Gap between Words and Deeds since Monterrey," Development Policy Review, Overseas Development Institute, vol. 31(1), pages 75-98, January.
    9. Han, Lu & Koenig-Archibugi, Mathias, 2015. "Aid Fragmentation or Aid Pluralism? The Effect of Multiple Donors on Child Survival in Developing Countries, 1990–2010," World Development, Elsevier, vol. 76(C), pages 344-358.
    10. repec:spr:revint:v:12:y:2017:i:2:d:10.1007_s11558-017-9275-2 is not listed on IDEAS
    11. Laura Pöntinen, 2015. "Sectoral Allocation of Aid: What Has Changed?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(4), pages 58-60, 01.
    12. repec:unu:wpaper:wp2012-69 is not listed on IDEAS
    13. Kai Gehring & Katharina Michaelowa & Axel Dreher & Franziska Spörri, 2015. "Do we know what we think we know? Aid fragmentation and effectiveness revisited," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 185, Courant Research Centre PEG.
    14. Molenaers, Nadia & Renard, Robrecht & Gagiano, Anna, 2013. "The Quest for Aid Complimentarity: Nordic+ Donors and NGO-cofunding Reforms," IOB Working Papers 2013.09, Universiteit Antwerpen, Institute of Development Policy (IOB).
    15. Kilby, Christopher, 2011. "What Determines the Size of Aid Projects?," World Development, Elsevier, vol. 39(11), pages 1981-1994.
    16. Knack, Stephen & Smets, Lodewijk, 2013. "Aid Tying and Donor Fragmentation," World Development, Elsevier, vol. 44(C), pages 63-76.
    17. Furukawa, Mitsuaki, 2014. "Aid Fragmentation and Effectiveness for Infant and Child Mortality and Primary School Completion," Working Papers 83, JICA Research Institute.
    18. Stefan Leiderer, 2015. "Donor Coordination for Effective Government Policies?," Journal of International Development, John Wiley & Sons, Ltd., vol. 27(8), pages 1422-1445, November.
    19. Acharya, Arnab & Martínez-Álvarez, Melisa, 2012. "Aid Effectiveness in the Health Sector," WIDER Working Paper Series 069, World Institute for Development Economic Research (UNU-WIDER).
    20. Furukawa, Mitsuaki, 2014. "Management of the International Development Aid System Aid System and the Creation of Political Space for China:The Case of Tanzania," Working Papers 82, JICA Research Institute.
    21. repec:eee:wdevel:v:99:y:2017:i:c:p:320-334 is not listed on IDEAS
    22. Amanda Glassman, Denizhan Duran, 2012. " An Index of the Quality of Official Development Assistance in Health - Working Paper 287," Working Papers 287, Center for Global Development.

    More about this item

    Keywords

    aid; aide; fragmentation; fragmentation;

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid

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