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What Determines the Size of Aid Projects?

Over the last few years, considerable attention has focused on aid fragmentation, the proliferation of donors and projects in developing countries. Aid fragmentation has continued to increase despite international efforts to foster donor coordination. One possible implication of fragmentation is smaller aid projects, potentially with the result of more administrative work for overtaxed recipient governments per dollar of aid received. In principle, project size can be a function of donor characteristics, recipient characteristics, donor-recipient relations, and the type of projects funded. This paper makes use of PLAID data on bilateral aid commitments, sector, and funding agency to explore the determinants of project size and to better understand the forces driving aid fragmentation. To the extent that project size is driven by the sectoral composition or purpose of aid, the associated administrative costs may be justified. Variations due to other factors, e.g., a donor's administrative structure or bureaucratic interests, provide a stronger case for reforms.

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Paper provided by Villanova School of Business Department of Economics and Statistics in its series Villanova School of Business Department of Economics and Statistics Working Paper Series with number 10.

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Date of creation: Mar 2010
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Handle: RePEc:vil:papers:10
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  1. Halonen-Akatwijuka Maija, 2007. "Coordination Failure in Foreign Aid," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-40, August.
  2. Kunibert Raffer, 1998. "‘Looking a Gift Horse in the Mouth’: Analysing Donors’ Aid Statistics," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 1(2), pages 1-20, November.
  3. Torsvik, Gaute, 2005. "Foreign economic aid; should donors cooperate?," Journal of Development Economics, Elsevier, vol. 77(2), pages 503-515, August.
  4. Emmanuel Frot & Javier Santiso, 2010. "Crushed Aid: Fragmentation in Sectoral Aid," OECD Development Centre Working Papers 284, OECD Publishing.
  5. Kimura, Hidemi & Mori, Yuko & Sawada, Yasuyuki, 2012. "Aid Proliferation and Economic Growth: A Cross-Country Analysis," World Development, Elsevier, vol. 40(1), pages 1-10.
  6. Emmanuel Frot & Javier Santiso, 2009. "Herding in Aid Allocation," OECD Development Centre Working Papers 279, OECD Publishing.
  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. 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.
  9. 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.
  10. David Roodman, 2006. "Aid Project Proliferation and Absorptive Capacity," Working Papers 75, Center for Global Development.
  11. 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.
  12. ARIMOTO Yutaka & KONO Hisaki, 2007. "Foreign Aid and Recurrent Cost: Donor Competition, Aid Proliferation and Budget Support," Discussion papers 07051, Research Institute of Economy, Trade and Industry (RIETI).
  13. Morss, Elliott R., 1984. "Institutional destruction resulting from donor and project proliferation in Sub-Saharan African countries," World Development, Elsevier, vol. 12(4), pages 465-470, April.
  14. Emmanuel Frot & Javier Santiso, 2008. "Development Aid and Portfolio Funds: Trends, Volatility and Fragmentation," OECD Development Centre Working Papers 275, OECD Publishing.
  15. 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.
  16. David Roodman, 2006. "Competitive Proliferation of Aid Projects: A Model," Working Papers 89, Center for Global Development.
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