Aid and Performance: A Reassessment

Abstract

Two visions of aid effectiveness and allocation are compared. The first, corresponding to the new aid paradigm, argues that aid is only effective if domestic policies are appropriate. The second, in contrast, argues that aid effectiveness depends on the external and climatic environment: the worse this environment, or the more vulnerable the recipient countries, the greater the effectiveness of aid. Cross-sectional econometric tests related to GDP growth on two 12-year pooled periods clearly favour the second view. The two views can be reconciled through the principle of performance-based aid allocation, where performance is defined as outcomes adjusted for the impact of environmental factors. Performance can then be measured in several manners which are subject to comparison. One approach would lead one to allocate more aid the worse the (external) environment is (for a given policy) and the better the policy is (for a given environment).World Bank Report, Aid Effectiveness, Allocation, Environmental Factors, Performance, Measurements,

Aid and growth in Sub‐Saharan Africa: accounting for transmission mechanisms

“…Another interpretation, or perhaps qualification, is that other factors undermined the effectiveness of aid in the poor performing countries. One potential source might be exogenous shocks; Guillaumont and Chauvet (2001) and Lensink and Morrissey (2000) show that external shocks and aid instability are growth-reducing although aid remains a positive factor. Our analysis cannot identify these (growth-retarding) factors, but it can suggest countries (and periods) that may warrant further investigation.…”

Foreign Aid Fiscal Policy: Theory and Evidence

“…The Burnside and Dollar study has received abundant comments from scholars and policy makers (Guillaumont & Chauvet, 2001;Collier & Dehn, 2001;Easterly et al, 2003) with some claiming that corresponding findings are extremely data-dependent (Clemens et al, 2004). Whereas Clemens et al (2004) have established that aid is beneficial in the short-term; Minou and Reddy (2010) have recently found that the beneficial effect could also be in the long-term.…”

Aid and Universal Primary Education

“…Based on the observation that ODA does not influence the mean GDP growth rate, the scientific community has started to look for the necessary conditions for its effectiveness. While the work of Burnside and Dollar (2000), Hansen and Tarp (2001), Guillaumont and Chauvet (2001) showed that the relationship between aid and growth was influenced by factors such as institutions, the quality of governance or macroeconomic instability, other studies such as those of Hadjimichael et al (1995), Lensink and White (2001) indicate that due to the presence of non-constant returns to scale, the relative non-effectiveness of aid was due to inadequate amounts of disbursements. More recently and following the work of Clemens et al (2004) a new trend of research has emerged.…”