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What is effective aid? How would donors allocate It?

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  • Kenny, Charles

Abstract

There are significant weaknesses in some of the traditional justifications for assuming that aid will foster development. This paper looks at what the cross-country aid effectiveness literature and World Bank Operations Evaluation Department reviews have suggested about effective aid, first in terms of promoting income growth, and then for promoting other goals. This review forms the basis for a discussion of recommendations to improve aid effectiveness and a discussion of effective aid allocation. Given the multiple potential objectives for aid, there is no one right answer. However, it appears that there are a number of reforms to aid practices and distribution that might help to deliver a more significant return to aid resources. We should provide aid where institutions are already strong, where they can be strengthened with the help of donor resources, or where they can be bypassed with limited damage to existing institutional capacity. The importance of institutions to aid outcomes, as well as the fungibility of aid flows, suggests that programmatic aid should be expanded in countries with strong institutions, while project aid should be supported based on its ability to transfer knowledge and test new practices and support global public good provision rather than (merely) as a tool of financial resource transfer. The importance of institutions also suggests that we should be cautious in our expectations regarding the results of increased aid flows.

Suggested Citation

  • Kenny, Charles, 2006. "What is effective aid? How would donors allocate It?," Policy Research Working Paper Series 4005, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4005
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    References listed on IDEAS

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    Cited by:

    1. Sumner, Andy, 2012. "Where Do The Poor Live?," World Development, Elsevier, vol. 40(5), pages 865-877.
    2. Tierney, Michael J. & Nielson, Daniel L. & Hawkins, Darren G. & Roberts, J. Timmons & Findley, Michael G. & Powers, Ryan M. & Parks, Bradley & Wilson, Sven E. & Hicks, Robert L., 2011. "More Dollars than Sense: Refining Our Knowledge of Development Finance Using AidData," World Development, Elsevier, vol. 39(11), pages 1891-1906.
    3. repec:pal:eurjdr:v:29:y:2017:i:4:d:10.1057_s41287-016-0064-1 is not listed on IDEAS
    4. Pedrosa-Garcia, Jose Antonio, 2017. "Trends and Features of Research on Foreign Aid: A Literature Review," MPRA Paper 82134, University Library of Munich, Germany.
    5. Bah, El-hadj M. & Ward, Jeremy, 2011. "Effectiveness of foreign aid in Small Island Developing States," MPRA Paper 32062, University Library of Munich, Germany.
    6. Bernard Walters, 2007. "The Fiscal Implications of Scaling up ODA to Deal with the HIV/AIDS Pandemic," Conference Paper 3, International Policy Centre for Inclusive Growth.

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    Keywords

    Development Economics&Aid Effectiveness; Banks&Banking Reform; School Health; Population Policies; Economic Theory&Research;

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