Waylaid Dialectic

August 27, 2014

Making progress on foreign aid…

Filed under: Aid — terence @ 8:46 am
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I’m only 6 pages in (usual disclaimer then, but hey when your blog is small as mine you can get away with this sort of stuff) yet Nancy Qian’s new NBER working paper on foreign aid is promising to become the best review of the economics and political science of aid written to-date.

The abstract:

Foreign aid is one of the most important policy tools that rich countries use for helping poor countries to improve population well-being and facilitate economic and institutional development. The empirical evidence on its benefits is mixed and has generated much controversy. This paper presents descriptive statistics which show that foreign aid to very poor countries accounts for very little of total global aid; reviews the evidence that foreign aid is often determined by the objectives of donor countries rather than the needs of recipient countries; argues that the evidence on the impact of aggregate foreign aid is hindered by problems of measurement and identification, which are partly due to the heterogenous nature of aid; and discusses recent studies using natural and randomized experiments to examine narrowed definitions of aid on more disaggregated outcomes.

Chris Blattman has already said many of the sensible things to be said of the paper. However, to add a couple:

1. It is surprising that economists such as Angus Deaton and William Easterly often focus on recipient side factors to explain why so much (their claim) / some (my claim) foreign aid does not seem to sustainably improve welfare. Given that, as Qian  shows, much aid does not seem to be given foremost for the purpose of helping recipients, it strikes me the first question we should be asking, before anyone starts shouting “aid doesn’t work” is whether we could give aid for more decent motives, and what might happen if we did. (This isn’t to say that aid which is given for reasons of our own interests itself never works; sometimes, I think it, can, often thanks to the hard efforts of aid workers).

2. If we are really serious about getting aid working (or, indeed, finding out what aid works, for what and in what circumstances), in addition to tackling our own political-economy of giving problems. We. Really. Need. To. Get. Better. Data. And do better testing. Data and methodology aren’t sexy and they don’t lend themselves to polemic. But if you want to know what works and why, they are essential.

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3 Comments

  1. amazingly, to my mind at least, she fails to make the point that giving aid to former colonies is a perfectly sensible way to coordinate aid amongst former colonialists to avoid duplication/fragmentation and needn’t indicate a lack of developmental motives

    Comment by Luis Enrique — August 29, 2014 @ 9:26 pm

  2. also discusses empirical aid growth literature without citing Clemens et al Counting Chickens, even whilst discussing disaggregation of aid. Also no citation for Temple’s Aid and Conditionality in Handbook of Development Economics. Nothing on absorption constraints. And in table 5 is absolute aid being regressed on population and GDP? If so that’s extremely dubious and hard to interpret.

    Comment by Luis Enrique — August 29, 2014 @ 9:43 pm

  3. Thanks Luis – two good points in your first comment.

    I think, having now read the whole thing, that a (partially forgiveable, as it doesn’t make claim to being a systematic review) fault is that it misses a lot of papers (for example, in the aid governance literature I know best, there are a number of aid improves governance papers missed out). And your point about aid to former colonies is fair up to a point, although if it’s hard to see how — in a world of genuinely well intended donors — it could lead to poor-country aid orphans.

    On table 5, you’d hope it was population and GDP/capita right?

    An additional complaint I have, is why military aid quietly gets to make an unannounced cameo in a paper that is about something else entirely: ODA.

    Comment by terence — August 30, 2014 @ 10:13 am


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