Increasing Selectivity of Foreign Aid, 1984-2002

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, aid overall was allocated indiscriminately without any consideration to the quality of governance, whereas in the 1990s there was a clear relationship between aid and governance (institutions and policies). This increasing selectivity of aid is good news for aid effectiveness. The bad news is that the aid agencies that the authors survey vary greatly in size. Some donors that are largest in absolute size, such as France and the United States, are not particularly selective. Japan comes in high on the policy selectivity index but far down on the poverty selectivity index, reflecting its pattern of giving large amounts of aid in Asia to countries that are well governed but in many cases not poor.

Bibliographic Details

Main Authors:	Dollar, David, Levin, Victoria
Language:	English en_US
Published:	World Bank, Washington, D.C. 2004-05
Subjects:	FOREIGN AID, POLICY SELECTION, PER CAPITA INCOME, POPULATION & DEMOGRAPHY, POLICY IMPACTS, WORLD BANK, MULTILATERAL AGENCIES, BILATERAL AGENCIES, STRUCTURAL ADJUSTMENT, GOVERNANCE, POVERTY MITIGATION, INTERNATIONAL ECONOMICS ABSOLUTE TERMS, AID AGENCIES, AID ALLOCATION, AID DEPENDENCY, AID EFFECTIVENESS, AVERAGE GROWTH, AVERAGE GROWTH RATE, BILATERAL AID, CAPITAL MARKETS, CITIZEN, CIVIL LIBERTIES, COMPREHENSIVE ASSESSMENT, CONCESSIONAL LOANS, DATA SET, DEBT RELIEF, DEMOCRACY, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPMENT AID, DEVELOPMENT ASSISTANCE, DEVELOPMENT COOPERATION, DEVELOPMENT ECONOMICS, DEVELOPMENT ISSUES, DEVELOPMENT PROJECTS, DEVELOPMENT STUDIES, DONOR AGENCIES, DONOR AID, DONOR POLICY, ECONOMIC COOPERATION, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC PERFORMANCE, ECONOMIC POLICIES, ECONOMIC REVIEW, ECONOMIC SHOCKS, ECONOMISTS, EMPIRICAL GROWTH LITERATURE, EMPIRICAL STUDIES, FACTOR ENDOWMENTS, GOOD GOVERNANCE, GROWTH RATE, GROWTH REGRESSION, GROWTH REGRESSIONS, INCOME COUNTRIES, INSTITUTIONAL ASSESSMENT, INSTITUTIONAL ENVIRONMENTS, INSTITUTIONAL MEASURES, INSTITUTIONAL QUALITY, INTERNATIONAL DEVELOPMENT, LAW INDEX, LONG-TERM GROWTH, LOW-INCOME COUNTRIES, MACROECONOMIC STABILITY, MONETARY ECONOMICS, MULTILATERAL INSTITUTIONS, NATIONAL INCOME, POLICY ENVIRONMENT, POLICY FRAMEWORK, POLICY PACKAGE, POLICY RESEARCH, POLICY SIDE, POLITICAL FACTORS, POLITICAL INSTITUTIONS, POLITICAL RIGHTS, POOR COUNTRIES, POPULOUS COUNTRIES, POVERTY FOCUS, POVERTY INDEX, POVERTY REDUCTION, PRIVATE SECTOR, PROPERTY RIGHTS, PUBLIC INVESTMENT, RULE OF LAW, SOCIAL DEVELOPMENT, SOCIAL INFRASTRUCTURE, STANDARD DEVIATION, TARGETING, TRADE OPENNESS, TRADE REGIME, TRANSPARENCY,
Online Access:	http://documents.worldbank.org/curated/en/2004/05/4268831/increasing-selectivity-foreign-aid-1984-2002 https://hdl.handle.net/10986/14090
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