Waylaid Dialectic

August 3, 2010

Counting Your Chickens Once They’ve Grown Up

Filed under: Aid — terence @ 9:13 am
Tags: , , ,

Like I said, caveat lector on all aid growth regressions, but this one’s kind of interesting:

Development aid and economic growth: A positive long-run relation

Camelia Minoiua and Sanjay G. Reddy

The Quarterly Review of Economics and Finance
Volume 50, Issue 1, February 2010, Pages 27-39
(Gated here; un-gated working paper here)

We analyze the growth impact of official development assistance to developing countries. Our approach is different from that of previous studies in two major ways. First, we disentangle the effects of two kinds of aid: developmental and non-developmental. Second, our specifications allow for the effect of aid on economic growth to occur over long periods. Our results indicate that developmental aid promotes long-run growth. The effect is significant, large and robust to different specifications and estimation techniques.

Interesting simply for the two ideas that it bases its analysis on:

  1. That the impact of aid on growth may be most clearly realised over long time-frames (once those healthy better educated kids have entered the workforce, for example).
  2. That different donors have different effects. In particular, those that give aid for developmental as opposed to geopolitical reasons are much more likely to give aid which works.

Point one is just an interesting point. Point two, I think, is essential to regonise explicitly whenever we talk about whether aid works or how we should give it better. Even if you’re sceptical about the regression evidence, there is so much evidence from the cold war of rent-a-dictator type aid going badly that the point is beyond debate.

And it’s worth acknowledging – before you start talking about Searchers or Planners, or the need to tailor aid programmes carefully to context (one of my main beliefs) – that aid needs to be given with good intentions. If it’s not (and too much of it hasn’t in the past) it’s highly unlikely to work.

The old saying is that ‘the road to hell is paved with good intentions’. Maybe, but almost always it was designed, engineered and hewn long before with abundant ill intent. Remember that – if you want aid to work, at the very least you’ve got to give it with the intent of helping people.

July 15, 2010

Take it Personally

Filed under: Aid — terence @ 5:19 pm
Tags: , , ,

This article examines how political institutions that provide an incentive to cultivate a personal vote condition the relationship between foreign aid and economic growth in developing country democracies. Politicians in aid-recipient countries with high levels of personalism are more likely to pursue corruption and target government spending to narrow constituencies. Because personalism affects these outcomes, it provides incentives to use foreign aid for politically motivated spending at the expense of investing foreign aid in growth-promoting public goods. Using panel data from 61 aid-recipient democracies from 1961 to 2001, the author finds that aid increases growth in democracies with less personalist institutions but decreases growth in countries with high personalism. The author also shows that personalism conditions the relationship between aid and the composition of government spending: Aid increases spending on public goods (relative to narrow, particularistic goods) in countries with low personalism but has the opposite effect in highly personalist countries.

– Joseph Wright, Aid Effectiveness and the Politics of Personalism, Comparative Political Studies, Feb 2010 (gated link here)

Thanks to David Roodman we’re all Aid Growth Regression sceptics now. And so my linking to this study comes with a great big caveat lector. However, the findings are intuitive (aid works worse in clientelistic political cultures) and certainly worth considering.

Whether they’re good news from an aid agency perspective depends of course on what type of countries you’re working in. As does what sort of practical conclusions might be drawn from the study. The most obvious one seems to me to be that, where states are reasonably functional, it makes sense to provide the lion’s share of ODA through the state (i.e. following Paris principles more or less). On the other hand, where states are heavily corrupt and or clientelistic, it’s seriously seriously worth channeling a significant proportion of aid through other means. Obvious.

Blog at WordPress.com.