Foreign Aid Transaction Costs: What Are They and When Are They Minimised?

Paul, Élisabeth; Vandeninden, Frieda

doi:10.1111/j.1467-7679.2012.00577.x

Cited by 18 publications

(13 citation statements)

References 17 publications

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“…Data on the implementation of the 2005 Paris Declaration on Aid Effectiveness are collected by the Organisation for Economic Co-operation and Development 18 but do not capture the full range of aid-effectiveness activities, are not disaggregated by sector and do not permit assessment of why certain aid effectiveness principles are adopted by some countries but resisted by others. It has been suggested that donors and recipients may resist aid coordination because it may weaken the recipient government’s negotiating position, 4 , 6 , 7 increase aid volatility 19 or impose new costs 6 , 10 , 20 …”

Section: Introductionmentioning

confidence: 99%

Responses to donor proliferation in Ghana’s health sector: a qualitative case study

Pallas

Nonvignon

Aikins

et al. 2014

Bull. World Health Organ.

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ObjectiveTo investigate how donors and government agencies responded to a proliferation of donors providing aid to Ghana’s health sector between 1995 and 2012.MethodsWe interviewed 39 key informants from donor agencies, central government and nongovernmental organizations in Accra. These respondents were purposively selected to provide local and international views from the three types of institutions. Data collected from the respondents were compared with relevant documentary materials – e.g. reports and media articles – collected during interviews and through online research.FindingsGhana’s response to donor proliferation included creation of a sector-wide approach, a shift to sector budget support, the institutionalization of a Health Sector Working Group and anticipation of donor withdrawal following the country’s change from low-income to lower-middle income status. Key themes included the importance of leadership and political support, the internalization of norms for harmonization, alignment and ownership, tension between the different methods used to improve aid effectiveness, and a shift to a unidirectional accountability paradigm for health-sector performance.ConclusionIn 1995–2012, the country’s central government and donors responded to donor proliferation in health-sector aid by promoting harmonization and alignment. This response was motivated by Ghana’s need for foreign aid, constraints on the capacity of governmental human resources and inefficiencies created by donor proliferation. Although this decreased the government’s transaction costs, it also increased the donors’ coordination costs and reduced the government’s negotiation options. Harmonization and alignment measures may have prompted donors to return to stand-alone projects to increase accountability and identification with beneficial impacts of projects.

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Section: Introductionmentioning

confidence: 99%

Responses to donor proliferation in Ghana’s health sector: a qualitative case study

Pallas

Nonvignon

Aikins

et al. 2014

Bull. World Health Organ.

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“…Yet, the common view that PA leads to higher transaction costs is debatable. In fact, Paul and Vandeninden (2012) developed a theoretical framework that shows that the minimisation of the transaction costs does not depend on the modality itself but rather on the different characteristics of the aid transaction. Another recent paper (Hermano and Martín-Cruz, 2013) evaluates the transaction costs of approximately 100 aid transactions carried out by the Spanish government via BS and PA and also concludes that the characteristics of the transaction matter (for example, complexity, uncertainty, asset specificity).…”

Section: Notesmentioning

confidence: 99%

How Should Donors Give Foreign Aid? A Theoretical Comparison of Aid Modalities

Jelovac

Vandeninden

2014

Eur J Dev Res

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Conditionality, and the extent to which it should be associated with development aid, has been a major concern within the donor community over the past decades. Practitioners argue in favour of associating budget support (BS) with some level of conditionality. A scientific analysis by Cordella and Dell'Ariccia confirms this view. The aim of this article is to qualify the circumstances under which conditionality is an effective complement to BS. To do this, we develop a theoretical model based on Cordella and Dell'Ariccia. We show that the optimal use of conditionality depends on the recipient's developmental preferences, the productivity of the inputs and the level of aid compared with the recipient's budget: when these parameters are relatively high, conditionality should be enforced. Otherwise, the optimal aid allocation is such that all the aid is given through unconditional BS. We conclude that conditionality does not always improve aid effectiveness.Depuis quelques décennies, la conditionnalité, et la mesure dans laquelle elle devrait être associée à l'aide publique au développement, est un souci majeur pour la communauté des bailleurs de fonds. Les praticiens du développement plaident en faveur d'un certain degrès de conditionnalité associé à l'aide budgétaire. Une analyse scientifique de Cordella et Dell'Ariccia (2007) renforce cette perspective. Le but de cet article est d'identifier les circonstances dans lesquelles la conditionnalité est un complément efficace à l'aide budgétaire. A cette fin, nous avons développé un modèle théorique dérivé de l'analyse de Cordella et Dell'Ariccia. Nous démontrons que l'utilisation optimale de la conditionnalité dépend des préférences du gouvernement récipiendaire en termes de politique de développement, de la productivité des apports et du niveau de l'aide publique au développement par rapport au budget du gouvernement récipiendaire. Lorsque ces paramètres sont relativement élevés, la conditionnalité devrait être appliquée. En cas contraire, l'aide publique au développement est optimale lorsque l'aide budgétaire est inconditionnelle. Nous en concluons que la conditionnalité n'améliore pas toujours l'efficacité de l'aide budgétaire. as to whether the donor's perspective is more or less legitimate than the recipient's. Our analysis of conditionality rests on the following trade-off: Conditionality associated with foreign aid helps to limit the problem of fungibility. It also implies that no aid is given to those who do not comply with the condition, which is worse than unconditional aid.The effectiveness of foreign aid has been a major concern in recent decades. Several empirical studies have shown the weak impact of aid on poverty reduction and growth (for example,

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“…39 Indeed, the health sector in Mali has been performing well over the past decade as most indicators of outputs and outcomes have progressed. 40 According to WHO and UNICEF estimates, the maternal mortality ratio has …”

Section: Level 3 Assessment: Outcomes/impactmentioning

confidence: 99%

“…MoH's financial department -which has been identified as a major factor impeding the implementation of planned activities. 36,37 As a result, transaction costs (even if difficult to measure) 39 were not perceived by interviewed stakeholders as decreasing. 33 …”

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confidence: 99%

Results from implementation of aid effectiveness principles in the health sector in Mali

Paul

Ireland

Martini

et al. 2012

J Public Health Pol

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Currently there is a climate of high expectations within the international community with regard to producing demonstrable results of aid effectiveness in the health sector both at global and developing country level. Yet, measuring the results from aid effectiveness presents methodological challenges. Existing evaluation frameworks are not sufficiently geared toward whether and how practices have changed. This paper presents a framework for measuring results from implementing the aid effectiveness principles at three levels: implementation process, system strengthening, and outcomes/impact. We developed it in the context of the monitoring of the results from the aid effectiveness agenda in the health sector in Mali. Despite some changes in behavior resulting in increased aid effectiveness and improved results at system and impact level, these principles have not been fully implemented so far. Expectations in terms of health outcomes should thus be realistic.

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Foreign Aid Transaction Costs: What Are They and When Are They Minimised?

Cited by 18 publications

References 17 publications

Responses to donor proliferation in Ghana’s health sector: a qualitative case study

Responses to donor proliferation in Ghana’s health sector: a qualitative case study

How Should Donors Give Foreign Aid? A Theoretical Comparison of Aid Modalities

Results from implementation of aid effectiveness principles in the health sector in Mali

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