One branch of the literature on aid effectiveness attempts to measure the contribution of foreign aid to the growth of developing countries. The micro results are clear and encouraging: foreign aid is beneficial to economic growth. However, until recently, the macro results were inconclusive: the impact of aid on growth was positive, negative, or even non-existent, in statistical terms. This contradiction is known as the “micro-macro paradox”. Certain methodological and econometric flaws inherent in the assessments being carried out up to the mid-nineties may provide an explanation for the misleading macro results. Examining a large panel data set, I have found that foreign aid has had a positive impact on economic growth. In light of these findings, I conclude that earlier-generation work is in accordance with the new and recent generation of aid effectiveness studies. Thus, less importance should be attributed to the “micro-macro paradox” as an overall appraisal of aid effectiveness. In terms of magnitude, I have also found that aid has less effect on growth in the short-run than in the long-run. I also conclude that the time lags in the aid-growth relationship should not be ignored.

Most of the aid effectiveness literature has focused on the potential growth effects of aggregate aid, with inconclusive results. Considering that donors have repeatedly stressed the multidimensionality of their objectives, a more disaggregated view on aid effectiveness is warranted. The impact of aid on education is analyzed empirically for almost 100 countries over 1970–2004. The effectiveness of sector-specific aid is assessed within the framework of social production functions. The Millennium Development Goals related to education, particularly the goal of achieving universal primary school enrollment, are considered as outcome variables. The analysis suggests that higher per capita aid for education significantly increases primary school enrollment, while increased domestic government spending on education does not. This result is robust to the method of estimation, the use of instruments to control for the endogeneity of aid, and the set of control variables included in the estimations.

Good governance and political corruption should be considered when aid flows to governments.

Fragile and conflict-affected states face daunting challenges for development. Aid has a greater importance on development in these states than in others, and therefore aid effectiveness management and delivery of aid bears serious consideration. Despite its significance, aid effectiveness is appreciably lower in fragile and conflict-affected states than in others. What are the key aid effectiveness challenges in these states and how can these issues be better addressed? As important initial steps, this paper aims to identify (i) aid effectiveness challenges facing fragile and conflict-affected states and (ii) good aid effectiveness examples using the results of the Survey on Monitoring the Paris Declaration on aid effectiveness, which was designed as a mechanism to support global and country level accountability. Both fragile and conflict-affected states (recipients) and development partners (providers) are mutually accountable for aid effectiveness; therefore, this paper focuses on both sides. While the analysis confirms the significantly lower aid effectiveness performance in fragile and conflict-affected states -- especially on aid on budget...

Why should partners in South-South cooperation care about aid effectiveness? What is the relevance of the commitments embodied in the Paris Declaration on Aid Effectiveness (2005) and the Accra Agenda for Action (2008) to development actors? These are questions I frequently hear.

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.

Private financial flows such as foreign direct investment seem toencourage economic growth and relieve poverty in part because theycreate excellent incentives for transferring know-how and in partbecause they are subject to a stern market test that ensures they areallocated and monitored carefully. For aid flows, not automaticallysubject to these disciplines, it is difficult to be as effective. ThisNote argues that aid agencies, by learning what makes private flowsso effective, can bring better aid to the poorest.

The authors revisit the relationship between aid and growth using a new data set focusing on the 1990s. The evidence supports the view that the impact of aid depends on the quality of state institutions and policies. The authors use an overall measure of institutions and policies popular in the empirical growth literature. The interaction of aid and institutional quality has a robust positive relationship with growth that is strongest in instrumental variable regressions. There is no support for the competing hypothesis that aid has the same positive effect everywhere. The authors also show that in the 1990s the allocation of aid to low-income countries favored those with better institutional quality. This "selectivity" is sensible if aid in fact is more productive in sound institutional and policy environments. The cross-country evidence on aid effectiveness is supported by other types of information as well: case studies, project-level evidence, and opinion polls support the view that corrupt institutions and weak policies limit the impact of financial assistance for development.

The Paris Declaration defined five components of aid effectiveness: ownership, alignment, harmonization, managing for results and mutual accountability. Afghanistan, which has received a high level of donor aid for health since 2002, has seen significant improvements in health indicators, expanded access to health services and an increased range of services. Do the impressive health outcomes in this fragile state mean that aid has been effectively utilized? The factors that contributed to the success of the Ministry of Public Health (MOPH)-donor partnership include as follows: Ownership: a realistic role for the MOPH as the steward of the health sector that was clearly articulated to all stakeholders; Donor alignment: donor coordination and collaboration initiated by the MOPH; Joint decisions: participatory decision-making by the MOPH and donors, such as the major decision to use contracts with nongovernmental organizations for health service delivery; Managing for results: basing programs on available evidence, supplementing that evidence where possible and performance monitoring of health-sector activities using multiple data sources; Reliable aid flows: the availability of sufficient donor funding for more than 10 years for MOPH priorities...

RESUMEN. Tras casi 50 años de investigación económica continúa resultando controvertido afirmar que la ayuda internacional haya favorecido el ritmo de crecimiento de los países en desarrollo. La cuestión de si la ayuda es eficaz se ha tratado de resolver a través de un proceso de contraste empírico, en el que la teoría económica aporta distintos modelos de crecimiento que “guían” la especificación de las relaciones empíricas a estimar. El análisis del impacto macroeconómico de la ayuda se inscribe en el debate más amplio sobre las fuerzas que impulsan el crecimiento, entendiéndose que la ayuda puede contribuir –junto a otros factores– al progreso económico del mundo en desarrollo; no obstante, dado que ninguno de los modelos teóricos propuestos hasta la fecha explica de manera plenamente satisfactoria el proceso de crecimiento, la fundamentación teórica de la relación ayuda-crecimiento sigue aun en “disputa”. Este artículo revisa la literatura sobre eficacia de la ayuda atendiendo a los principales progresos alcanzados en el marco teórico y en la estimación econométrica.; ABSTRACT. After 50 years of economic research it is still debatable whether international aid has favoured the peace of growth of developing countries. The question of the effectiveness of aid has tried to be solved through an empirical process...

RESUMEN. Este artículo analiza el impacto de la Ayuda Oficial al Desarrollo en los países de América Latina y el Caribe a través de un modelo de crecimiento endógeno. Evaluamos la eficacia de la ayuda en relación con la tasa de crecimiento del PIB per capita de la población con renta inferior al noveno decil (“PIB per capita ajustado por la desigualdad”), al objeto de definir de manera precisa el impacto deseado de la ayuda en un ámbito geográfico de elevados niveles de desigualdad. Asimismo, distinguimos el impacto de dos modalidades de ayuda: donaciones y créditos. La estimación econométrica arroja tres conclusiones principales: i) la ayuda resulta eficaz, en términos agregados, cuando se corrige el efecto de las desigualdades de renta; ii) el impacto de los créditos concesionales es mayor que el de las donaciones; y iii) la ayuda resulta más eficaz en los países menos corruptos.; ABSTRACT. This article uses an endogenous growth model to analyze the impact of Official Development Assistance in Latin American and the Caribbean. The model evaluates aid effectiveness in relation to the growth rate of the GDP per capita within the population with lower income than the ninth decile (“inequality-adjusted GDP per capita”)...

In the context of an increased focus on aid effectiveness, on higher-level development goals and on Country Strategies, attention necessarily turns to Country Strategy Evaluation. Governments and Boards demand evidence that the rising aid allocations are achieving results, and the current ethos of results management requires information on performance in order to improve management and decision-making. As such, development organisations must develop feasible and credible methods of evaluation at the country level. At the core of this issue is the question of attribution: How might development outcomes in a partner country be linked to the activities of the given aid agency? This is particularly difficult given the focus on higher-level objectives. Previously, the quality of inputs and outputs were assessed, which is, relatively speaking, within the control of the agency. However the focus on higher-level outcomes lies 'embedded in complex social systems', influenced by a host of external and internal factors, and is seldom attributable to a single agency's activities. There are three broad approaches to evaluation at the country level. Firstly, 'results framework' approaches centre on a pre-determined framework with a multiplicity of set indicators. This involves the collection of a substantial amount of data...

CONTENTS: EDITOR'S NOTES. OPENING ADDRESS: Effective aid: A whole-of-government approach / The Hon. Chris Gallus MP, page 5. DISCUSSION: Introduction: Summing up and the way forward— a retrospective and prospective on aid effectiveness / Geoffrey Fox, page 7. FEATURES: REFORMING THE STRUCTURE OF AID - Aid effectiveness: Threats to the new ‘consensus’? / Janet Hunt and Bill Morton, page 11. Australian aid in the new millennium / Satish Chand, page 16. Poverty-efficient official development assistance / Mark McGillivray and Simon Feeny, page 22. A contrarian view on aid effectiveness / Tim Curtin, page 27. Developing effective aid delivery frameworks within policy parameters / Annmaree O’Keeffe, page 31. Donor harmonisation for improved aid effectiveness / Michael Ward, Derek Sikua and Tony Banks, page 35. Aid and partnerships: The effectiveness of relationships / John Overton and Donovan Storey, page 41. Negotiating alternative economic strategies for regional development / Kathryn Robinson, Katherine Gibson, Deirdre McKay and Andrew McWilliam, page 46. REVIEWING AND REFORMING AID PLANNING AND PRACTICE - A new framework for NGO effectiveness / Linda Kelly, page 51. Investing in aid effectiveness: The contexts and challenges for Australian NGOs / Rhonda Chapman...

The purpose of this report is to examine the viability of funding an increase in Northern Australia's tropical health and medical research capacity through a foreign aid budget allocation. The report reviewed the scope for increasing medical research funding and improving aid effectiveness. It also entailed a case study of the Australian Centre of International Agricultural Research (ACIAR) that could form a model for supporting an increased medical research capability. Further, the report analysed the existing foreign aid budget allocation and the proposed future increases. Australian Centre of International Agricultural Research (ACIAR) pose a significant public health challenge to Northern Australia. These challenges are primarily attributable to Northern Australia's geographical location, climate, rapid population growth, and tropical health threats from the neighbouring countries with underdeveloped health capacity. To mitigate these health threats, Australian governments should consider providing more funding support to increase the tropical health and medical research capacity in Northern Australia. Australia's foreign aid budget could be an important funding source. In the context of a relatively large and rapidly increasing aid budget...

At the #rd HLF, the Parallel Civil Society Forum highlighted the fundamental issues thaht concern CSOs in developing countries. This is the CSO's concluding statement, written by Reality of Aid (Roa).

This paper proposes a new framework to analyze aid effectiveness. Using World Bank firm survey data and OECD aid flow data, the authors analyze whether aid targets areas that firms in developing countries have identified as obstacles for their growth and whether aid actually improves firms' perceptions of those areas. The analysis finds that aid does target the areas that firms have identified as obstacles; aid funding trade related projects is particularly effective in targeting the correct countries. For the most part, aid has a positive impact on improving firms' perceptions, particularly in the business environment. And for each target area, smaller aid disbursements tend to be more effective at improving firm perceptions than larger disbursements.

Assessing Aid: What Works, What Doesn't, and Why (The World Bank, 1998) generated a new wave of controversy about foreign aid and policy conditionality that had seen several decades of intense debate. Much of the recent debate has focused on the aid-growth relationship and the role of "good" policies. While a great deal has been said about qualitative aspects of aid effectiveness (that is, fungibility, among other things), little attention has been paid so far to some important quantitative aspects. The author draws attention to this neglected aspect of the aid debate to show that the level of aid requirements of a country is an equally important and integral part of aid and aid effectiveness. The author compares the World Bank/IMF approaches to estimation of external assistance requirements of a country in quantitative terms with an alternative model, the "balance of payments constrained growth model" (based on the Harrod trade multiplier). He finds that the latter model is not a real alternative as it is an incomplete model. More important...

The authors examine the allocation of foreign aid by 41 donor agencies, bilateral and multilateral. Their policy selectivity index measures the extent to which a donor's assistance is targeted to countries with sound institutions and policies, controlling for per capita income and population. The poverty selectivity index analogously looks at how well a donor's assistance is targeted to poor countries, controlling for institutional and policy environment as measured by a World Bank index. The authors' main finding is that the same group of multilateral and bilateral aid agencies that are very policy focused are also very poverty focused. The donors that appear high up in both rankings are the World Bank's International Development Association, the International Monetary Fund's Enhanced Structural Adjustment Facility, Denmark, the United Kingdom, Norway, Ireland, and the Netherlands. As a robustness check the authors alternatively use institutional quality measures independent of the World Bank and find the same pattern of selectivity. They also find that policy selectivity is a new phenomenon: in the 1984-89 period...

Mestrado em Desenvolvimento e Cooperação Internacional; The Paris Declaration on Aid Effectiveness is a new arrangement to manage and deliver foreign aid; a project to target and align this aid to institutional reform processes in recipient countries; and an exercise in monitoring the effectiveness of those two preceding objectives. The declaration is divided between implementation and monitoring of these objectives. Over a hundred participants including all OECD-DAC members, multilateral institutions, and 60 partner countries signed up to the declaration in 2005. Each signature agreed to 50 partnership commitments organised around five key principles: ownership, alignment, harmonisation, managing for results, and mutual accountability. Twelve indictors were outlined to monitor the progress toward these commitments. Each indicator has been given a target to stimulate a results-orientated plan towards aid effectiveness. This thesis analyses the structure that has been constructed to implement as well as monitor the 50 commitments, 12 indicators of progress and 12 accompanying targets of the Paris Declaration. The thesis is divided in three with a chapter to assess (i) the origins and foundations of the new aid policy objectives outlined in the declaration; (ii) the framework(s) that have been developed to implement the declaration; and (iii) the monitoring and evaluation process that is design to ensure effective results.

The aid effectiveness literature (AEL) consists of empirical macro studies of the effects of development aid. By the end of 2004, it had reached 97 econometric studies of three families, which have been analyzed in one study for each family using meta-analysis. The AEL is an ideal subject for meta-analysis as it uses only a few formally similar models which try to catch precisely the same effects. Also, it is an area with strong beliefs ? often generated by altruism ? and interests. In this survey of the AEL, we shows that when the whole of the literature is examined, a clear pattern emerges in the results: after 40 years of development aid, the evidence indicates that aid has not been effective. We show that the distribution of results is significantly asymmetrical in a way that reflects the reluctance of the research community to publish negative results. The Dutch Disease effect of aid has been ignored but is a plausible explanation for aid ineffectiveness.