The folly of “aid for stabilisation”

Over the last two decades, billions in aid money has been spent in highly insecure regions of conflict affected states in the hope that aid would lead to less violence and more stability. A recent wave of academic work on the impact of aid on violence has now amassed convincing empirical evidence that this hope is futile. Aid injected in highly insecure regions, where violence is a reality and insurgents retain some capacities, will increase, not dampen violence. This essay first provides a summary of the findings of the recent empirical literature. It then demonstrates that two causal mechanisms – predation and sabotage – explain why aid in highly insecure settings will likely lead to less, not more, stability. The essay then exemplifies these two causal mechanisms, using original qualitative and quantitative data from Afghanistan. It ends with a discussion of the implications for donors engaged in countries affected by conflict.     

Are There Negative Returns to Aid?

The World Bank report Assessing Aid assumes that an inflow of aid, above a certain level, starts to have negative effects. In this analysis we empirically test this assumption. We find evidence for negative returns to aid at high levels of aid inflows. However, the results are sensitive to both the countries included in the sample and model specification. Moreover, the turning-point above which aid starts to have a negative effect on growth seems to be much higher than assumed in the background calculations for Assessing Aid.     

Can there be mercy without the merciful? A meditation on Martha Nussbaum’s questions

Martha Nussbaum raised profound concerns about aid as being conceived out of the self-directed charity of donors and not the expressed concerns of those being aided. Even when the recipients of aid seek to express their concerns, their capabilities may not recognise their own conditions and desirable remedies. This paper agrees that Nussbaum’s questions are profound, but argues that even they do not go far enough.     

Aid and Trade – A Donor's Perspective

One reason donors provide foreign aid is to support their exports to aid-recipient countries. Time series data for Germany suggests an average return of between US$1.04–$1.50 for each US dollar of aid spent by Germany. Although this is well below previous estimates, the value is robust to different specifications and econometric approaches. Interestingly, we find strong evidence of crowding out between bilateral donors in the sense that bilateral aid from other EU members significantly reduces exports from Germany to the recipients. The evidence suggests that, in the long run, aid causes exports and not vice versa. We discuss the implications these findings might have for aid volumes and allocation.     

The Fungibility of Health Aid Reconsidered

This article draws further attention to the importance of taking into account off-budget aid when estimating the degree of foreign aid fungibility. It does so by re-evaluating the results of a recent, influential paper which concluded that health aid is fully fungible in the long run. Allowing for the presence of off-budget aid indicates that the degree of fungibility of health aid is much more uncertain than at first blush appears. Under plausible assumptions about the role of off-budget aid, the conclusion of full fungibility is overturned and at most only a limited degree of fungibility is found.     

The Fungibility of Health Aid: Reconsidering the Reconsidered

Lu et al. found that health aid displaces domestically-raised government health expenditure, which renders health aid at least partially fungible. These findings are questioned in The Fungibility of Health Aid Reconsidered. Van de Sijpe’s emphasis on disaggregating on- and off-budget aid is a valid contribution, although his empirical conclusions are overstated. We re-evaluate the data he criticises and find they sufficiently capture on-budget aid. To re-measure health aid fungibility, we update the Lu et al data, adding 23 countries and four years of data. Despite the confidence we have in these data, we employ two estimation specifications, each of which addresses the measurement error discussed by Van de Sijpe. The extended data and alternative methods show that development assistance for health channelled to governments remains significantly fungible.     

On Aid,Growth and Good Policies

This study provides a critical analysis of the growth regressions in Burnside and Dollar [2000]. First, we analyse the relationship between aid and government expenditure in a modified neo-classical growth model. One of the main results of the analysis is that while good policies spur growths they may at the same time reduce the effectiveness of foreign aid. Second, we show that the econometric results in Burnside and Dollar emphasising the crucial role of interaction between aid and good policies in the growth process are fragile, as they are extremely data dependent. Finally, we demonstrate that the Burnside and Dollar data lend support to the idea that the association between aid and growth can be approximated by decreasing returns to aid. This finding conforms well to regression results in other recent studies.     

The Political Economy of Aid and Governance in Cambodia

The impact of massive aid on development and governance has been studied for a decade with mixed results. Using the results of an elite survey on aid and quality of governance based on Kaufmann et al.'s six dimensions (voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption), this article offers a case-study of Cambodia. The country's challenges in light of high aid dependence and ‘Dutch disease’ in the aid sector are elaborated, and disappointing human development outcomes are examined. Despite more than five billion dollars in aid, infant and child mortality and inequality have worsened. Key informants are overwhelmingly in agreement that, save for political stability, aid has not had a positive impact on governance in Cambodia. The failure on control of corruption shows how hard it is for donors to be tough on a country with extreme poverty. On the basis of what has been accomplished to date, however, aid seems unlikely to be able to deliver large improvements in governance and in many ways may even contribute to its further deterioration.     

How Concessional is Aid Lending?

The method used by Development Assistance Committee countries for measuring the concessionality of aid loans has remained unchanged for nearly 20 years. It was designed to measure the net cost of aid to donors not the net benefit to recipients. The discount rate used takes no account of changes in the value of the currency of the loan or of changes in prices for goods traded by recipient countries. Furthermore, it does not consider the implications of tying of aid or of policy conditionality. This paper suggests an alternative measure that shows the real net benefit of aid finance to recipients. It argues that the discount rate used by the Development Assistance Committee is too high and that changes in the value of the currency in which a loan is taken out can be important. Nevertheless, real rates of interest for developing countries remain surprisingly high despite low nominal rates due to falling prices of traded goods. This finding has implications for the future real cost of debt service to recipients.     

The Obstacles to Foreign Aid Harmonization: Lessons from Decentralization Support in Indonesia

Relying on a new institutional economics analysis of transaction costs, the 2005 Paris Declaration on Aid Effectiveness emphasizes donor harmonization as an intermediate objective for increasing the effectiveness of foreign assistance in bringing about development outcomes. Surveys on adherence to the Paris Declaration commitments so far suggest that foreign aid donors are lagging behind targets. This paper explores the political and bureaucratic obstacles faced by bilateral and multilateral aid organizations trying to harmonize aid at the country level. Looking at foreign support for the decentralization and local governance sector in Indonesia??where a ??bold experiment?? in harmonization failed to bring about improved donor coordination??I find evidence that the lack of harmonization can be linked to some of the characteristic pathologies of foreign aid: the dominance of the strategic interests of some donors and the structure of bureaucratic incentives within aid agencies. These traditional problems work through a pathway that is underexplored in the literature: by enabling a lack of coordination among agencies within the recipient government, donors create barriers to harmonization of their own programming. However, I conclude by noting that government coordination failure may not be as much of a problem as donors make it out to be. Decisions about governance and decentralization are necessarily contentious and political. In the case where donors succeed in bringing about government coordination in the interest of their own harmonization, they risk exercising harmful leverage that leads to premature resolution of domestic policy disputes, thereby undermining the Paris Declaration principle of country ownership.     

Shared services in Brazilian local government: Urban development in small counties

In this article we break new ground by investigating cooperative agreements in urban development services, which include urban development, housing and sanitation for small local governments in Brazil (i.e., those with fewer than 20,000 residents in 2013–15). We find that public expenditure on urban development can be explained by both horizontal (intermunicipal cooperation) and vertical (public–public partnerships) cooperation. Regarding the impact of public sector cooperation on public expenditure, our results show that housing and sanitation services are less costly under intermunicipal cooperation. By contrast, urban development services are less costly when local authorities do not cooperate with other public entities. For public–public partnerships (with the state or federal government) cooperation leads to an increase in public funding, which implies that cooperative agreements might not lead to lower public expenditure. The findings in this article provide useful empirical insights into the administrative reorganization of Brazilian local government.     

Exploring the Relationship between Operational and Financial Indicators: The Case of Water and Sewer Utilities

ABSTRACT

There is debate in the literature on whether or not general management principles are applicable to the study and practice of public administration. This research responds by exploring how local officials manage the performance of public services with private good characteristics, where general management principles could be embraced for service delivery. The relationship between operational and financial indicators is explored within the functional areas of water and sewer, with the hypothesis that operational outcomes impact financial outcomes similar to private enterprises. Because the findings do not support this hypothesis, the authors conclude that general management principles may not be applicable to all forms of administration given that public cannot be removed from the management of public services even with private good characteristics.     

From aid negotiation to aid effectiveness: the case of food and nutrition security in Ethiopia

This paper looks at aid ownership through the lens of negotiations that take place between a country and its development partners (DPs). Based on the case of Ethiopian food security policies, it combines a structural analysis of the negotiation capital of both parties with an actor-oriented analysis of the institutional setting through which negotiations take place. First, it shows that the growing influence donors have come to have in the shaping of Ethiopian public policies results from the relative loss of legitimacy the government has experienced after the 2005 political crisis and its greater need for external economic assistance. Second, the more recent creation of a negotiation platform between the Government of Ethiopia (GoE) and its DPs has allowed the GoE to enhance donor’s alignment with its development policies and regain some control over its development agenda, while giving them more room to contribute to several food and nutrition security policy reforms which have been positively evaluated. The paper stresses the need for donors to better recognise the centrality of politics in any aid intervention.     

Political Influence on Public–Private Partnerships in the Public Health Sector in New Zealand

The purpose of this article is highlight the influences on the performance of public-private partnership organizations established to provide procurement services for public-sector organizations. The findings provide evidence of some values-based fracturing in public-private partnerships in the New Zealand public sector. However, it is the impact of political influence that illustrates significant potential to undermine effectiveness and efficiency. This case suggests there are innovative approaches which can be adopted—other than traditional models of public expenditure—yet still providing a sustainable public health service. Finally the case argues for the importance of appropriate political understanding of the changing scenarios.     

Health,Need and Politics: The Determinants of Bilateral HIV/AIDS Assistance

Over the last 10 years foreign aid for HIV/AIDS control has grown from ‘millions to billions’. This study investigates donor motivations in the targeting of bilateral HIV/AIDS assistance. Are donors selecting recipients primarily based on level of need or are political and merit-based considerations at play as well? The results of our two-stage statistical analysis of bilateral HIV/AIDS assistance flows over the period 2002–2007 suggests that recipient need is an important determinant of aid flows. We also find limited evidence of dyadic political relationships having an effect on assistance targeting, while the quality of recipient policy environments seems to have a minimal impact on donor allocation decisions.     

Does Health Aid Reduce Infant and Child Mortality from Diarrhoea in Sub-Saharan Africa?

Achieving sustained improvements in health outcomes remains a challenge for sub-Saharan Africa, where diarrhoea remains a leading cause of death in children under the age of five. This paper examines the impact of foreign aid to the health sector on diarrhoea mortality in children under five in 47 sub-Saharan African countries, using panel data on the sectoral allocation of official development assistance in conjunction with country-level data on health outcomes. After controlling for fixed effects and the potential endogeneity of health aid, we find that increased health aid and increased public health expenditure are associated with lower diarrhoea mortality in children under five. In addition, health aid increases government spending on health, suggesting that the overall impact of health aid on diarrheal death rates could exceed the direct effect. Furthermore, increased access to improved sources of water and sanitation are important in reducing child mortality from diarrhoea.     

Governance,Representation and International Aid

The growth of the postwar 20th century international aid architecture has generated much debate over the successes and failures of aid, its changing forms and its challenges. This article uses this aid landscape to explore the representational or discursive power and authority of the aid donor over the aid recipient. It suggests that representations about what aid does, its modalities and dispensations reproduce a hegemonic discourse and that representational authority in diagnosing aid’s problems and prescribing solutions resides generally on one side of the aid binary. It thus focuses on the hierarchical or asymmetric relations of power implied by such a binary, on the way development aid in particular has come to shape self-understandings of donors in relation to recipients, and on the discursive labour that enables such a construction. It also explores how the post-Washington consensus on poverty eradication has embedded neoliberal solutions to development. The reproduction of the hegemonic aid discourse is examined in reference to NGOs involved in the dispensing of aid in Southeast Asia by drawing on scholarly literature and field research in Southeast Asia and Washington DC.     

The Contribution of Donor Support Programs to Decentralized Development: Learning from the District Level in Ghana

Donor aid has over the years turned out to be a very decisive development component for most developing nations, but aid is often criticized for ineffectiveness. This article seeks to share perspectives on the relevance of direct project or program support and the need to refrain from homogeneity in aid research by assessing the contribution of the Government of Ghana/European Union (GoG/EU) Micro-Projects Programme in the Nadowli District of Ghana from 1997–2009. The findings acknowledge positive impacts of the program in the district. There are sector consistencies between the donor interest and local development priorities in health, education and the water and sanitation sectors. However, selectivity of project within and among sectors brings potential conflicts of interest and tradeoffs between the program and local community needs. The results imply a reexamination of decentralized development through a lens of new partnership between donors’ interest and local needs. Stepping up community awareness to ensure full participation in project design, execution, operation, and maintenance could serve as a start-up platform for new partnerships. It is imperative to align donor interest with local realities, which prompts a rethinking of adoption of new project approaches such as co-development, design, and implementation.     

How to Attract Donations: The Case of US NGOs in International Development

We assess the determinants of private donations across a large sample of US based NGOs with foreign aid activities. Our results show that donations do not depend in the expected way on publicly available information on NGO characteristics that reveal an efficient and targeted use of funds, notably the efficiency price of NGO aid and the degree of specialisation. Private donors rather rely on the frequently offered option to designate donations to preferred purposes – even though this is unlikely to tie the NGOs' hands.     

Negative feedback,political attention,and public policy

More than 50 years of policy research has provided evidence of negative feedback where self‐correcting mechanisms reinforce stability in public policies over time. While such mechanisms are at the heart of understanding change and stability in public policies, little attention has been given to the responses of individual policy‐makers to public policies as a potential driver of negative feedback. Based on a unique survey dataset of spending preferences of local government politicians covering more than 90 Danish municipalities, three years, seven policy issues, and around 3,000 entries, we find that the expressed spending preferences of politicians are indeed negatively affected by previous spending levels. Moreover, such negative feedback effects are stronger, the less the political attention to the issue and even disappear at high levels of attention. Our analysis thus provides important evidence on the micro foundations and conditions of negative feedback in public policy.