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Research related to:  Aid

Eroding the Culture of Contracting: Aid, Not Trade?

We analyze how two well-known development policies—international trade and aid—affects the ‘culture of contracting.’ The culture of contracting refers to those cultural characteristics—trust, respect, level of self-determination, and level of obedience—which allow for the impersonal exchange necessary for growth and development. Theoretically, trade and aid may affect the culture of contracting for better or worse. We empirically analyze both possibilities and find that international trade generates, on net, positive effects while foreign aid generates negative effects on the culture of contracting. The more open a country is to trade and the less aid it receives, the more likely it is to possess a stronger culture of contracting.
Christopher J. Coyne and Claudia R. Williamson

The Amplification Effect: Foreign Aid's Impact on Political Institutions

How does foreign aid affect recipient countries’ political institutions? Two competing hypotheses offer contradictory predictions. The first sees aid, when delivered correctly, as an important means of making dictatorial recipient countries more democratic. The second sees aid as a corrosive force on recipient countries’ political institutions that makes them more dictatorial. This paper offers a third hypothesis about how aid affects recipients’ political institutions that we call the “amplification effect.” We argue that foreign aid has neither the power to make dictatorships more democratic nor to make democracies more dictatorial. It only amplifies recipients’ existing political institutions. We investigate this hypothesis using panel data for 124 countries between 1960 and 2009. Our findings support the amplification effect. Aid strengthens democracy in already democratic countries and dictatorship in already dictatorial regimes. It doesn’t alter the trajectory of recipients’ political institutions.
Nabamita Dutta, Peter T. Leeson and Claudia R. Williamson

Rhetoric versus Reality: The Best and Worst of Aid Agency Practices

Foreign aid critics, supporters, recipients and donors have produced eloquent rhetoric on
the need for better aid practices – has this translated into reality? This paper attempts to monitor the best and worst of aid practices among bilateral, multilateral, and UN agencies. We create aid practice measures based on aid transparency, specialization, selectivity, ineffective aid channels and overhead costs. We rate donor agencies from best to worst on aid practices. We find that the UK does well among bilateral agencies, the US is below average, and Scandinavian donors do surprisingly poorly . . . 

Leveraging HIV Programs to Deliver an Integrated Package of Health Services: Some Words of Caution

Over the past decade, HIV programs have been successfully scaled up in many developing countries, leading some to wonder how the investments made into HIV infrastructure could be leveraged to deliver additional health services. Although the concept is appealing from many perspectives, integrating additional health services into existing vertical HIV infrastructure may not mitigate some of the challenges these programs have introduced in implementing countries . . . 
Karen Grepin

Peer-to-Peer Financing for Development: Regulating the Intermediaries

Private international finance for individual and small business recipients seeking to improve development outcomes is particularly in vogue, and a bewildering variety of intermediaries have emerged to channel the growing capital flows. Some of these intermediaries work much like conventional charities, collecting and transmitting private donations for private recipients advancing development—defined to include both private sector growth and institutional reform . . .

Does the Globalization of Anti-corruption Law Help Developing Countries?

What role do foreign countries play in combating political corruption in developing countries? This chapter begins by describing the recently developed transnational anti-corruption regime, which encompasses legal instruments ranging from the dedicated multilateral agreements sponsored by the OECD and the United Nations, to the anti-corruption policies of the international financial institutions, to components of the international anti-money laundering regime, international norms governing government procurement, and private law norms concerning enforcement of corruptly procured contracts. It also surveys the evidence concerning a variety of claims about the potential advantages and disadvantages of having foreign institutions play a role in preventing, sanctioning, or providing redress for corruption on the part of local public officials . . . 
Kevin E. Davis

Selling Out on the UN Security Council

Election to the United Nations Security Council (UNSC) provides nations with an opportunity to trade policy support in exchange for aid and other forms of financial assistance. Nations elected to one of the ten temporary two year seats on the United Nations Security Council experience substantially lower economic growth during their time on the council than comparable nations not on the UNSC. Over the two year period of UNSC membership and the following two years, during which a nation is ineligible for reelection, UNSC nations experience a 3.5% contraction in their economy relative to nations not elected to the UNSC. Further, on average nations in the UNSC become less democratic and experience an increase in the level of restrictions on press freedom. The effects of UNSC membership on political and economic development are particularly strong in non-democratic states.
Alastair Smith, NYU and Bruce Bueno de Mesquita, NYU

Getting Climate-Related Conditionality Right

Conditionality has gotten a bad name in development finance. But it may be rehabilitated by the emerging climate change regime. Mitigating climate change by reducing emissions of greenhouse gases (GHGs) from developing countries will require substantial amounts of capital. Some of that capital will come from individuals or organizations who insist that their funds be used in ways that tend to promote mitigation. In other words, they will insist on conditionality. This raises a number of policy concerns, including several that are reminiscent of debates about conditionality in other contexts . . . 
Kevin Davis, NYU and Sarah Dadush, NYU

Exploring the Failure of Foreign Aid: The Role of Incentives and Information

The stated purpose of foreign aid is to promote economic and human development. Recently, the ability of foreign aid to achieve its goals is called into question. Widespread conceptual and empirical literature suggests that foreign aid is ineffective. This paper explores the failure of foreign aid relying on the role of both incentives and information. The success of aid depends on incentives faced by all parties in donor and recipient countries. In addition, both donors and recipients must obtain the necessary information to actually target and achieve desired goals. This analysis provides a double-edged sword to explain why foreign aid fails to achieve development goals.
Claudia R. Williamson

Can the West Save Africa?

In the new millennium, the Western aid effort towards Africa has surged due to writings by well-known economists, a celebrity mass advocacy campaign, and decisions by Western leaders to make Africa a major foreign policy priority. This survey contrasts the predominant "transformational" approach (West saves Africa) to occasional swings to a "marginal" approach (West takes one small step at a time to help individual Africans). Evaluation of "one step at a time" initiatives is generally easier than that of transformational ones either through controlled experiments (although these have been much oversold) or simple case studies where it is easier to attribute outcomes to actions. We see two themes emerge from the literature survey: (1) escalation. As each successive Western transformational effort has yielded disappointing results, the response has been to try an even more ambitious effort. (2) the cycle of ideas. Rather than a progressive testing and discarding of failed ideas, we see a cycle in aid ideas in many areas in Africa . . . 
William Easterly

Where Does the Money Go? Best and Worst Practices in Foreign Aid

Foreign aid from official sources to developing countries (excluding private aid) amounted to $103.6 billion in 2006 and has amounted to over $2.3 trillion (measured in 2006 dollars) over the past 50 years. There have been fierce debates over how effective this aid has been or could be in the future (for example, Sachs, 2005; Easterly, 2006). However, this paper does not address the already ubiquitous issue of aid effectiveness—that is, the extent to which foreign aid dollars actually achieve their goals of reducing poverty, malnutrition, disease, and death. Instead, this paper focuses on “best practices” in the way in which official aid is given, which is an important component of the wider debate . . . 
William Easterly and Tobias Pfutze

How the Millennium Development Goals are Unfair to Africa

Those involved in the millennium development goal (MDG) campaign routinely state ‘‘Africa will miss all the MDGs.” This paper argues that a series of arbitrary choices made in defining ‘‘success” or ‘‘failure” as achieving numerical targets for the MDGs made attainment of the MDGs less likely in Africa than in other regions even when its progress was in line with or above historical or contemporary experience of other regions. The statement that ‘‘Africa will miss all the MDGs” thus has the unfortunate effect of making African successes look like failures.
William Easterly

Reliving the 50s: the Big Push, Poverty Traps, and Takeoffs in Economic Development

he classic narrative of economic development -- poor countries are caught in poverty traps, out of which they need a Big Push involving increased investment, leading to a takeoff in per capita income -- has been very influential in foreign aid debates since the 1950s. This was the original justification for foreign aid. The narrative lost credibility for a while but has made a big comeback in the new millennium. Once again it is invoked as a rationale for large foreign aid programs. This paper applies very simple tests to the various elements of the narrative. Evidence to support the narrative is scarce . . .

Are Aid Agencies Improving?

The record of the aid agencies over time seems to indicate weak evidence of progress over time in response to learning from experience, new knowledge, or changes in political
climate. The few positive results are an increased sensitivity to per capita income of the recipient (although it happened long ago) a decline in the share of food aid, and a decline in aid tying. Most of the other evidence -- increasing donor fragmentation, unchanged emphasis on technical assistance, little or no sign of increased selectivity with respect to policies and institutions, the adjustment lending-debt relief imbroglio -- suggests an unchanged status quo, lack of response to new knowledge, and repetition of past mistakes.
William Easterly

Reliving the 50s: the Big Push, Poverty Traps, and Takeoffs in Economic Development

The classic narrative of economic development -- poor countries are caught in poverty traps, out of which they need a Big Push involving increased aid and investment, leading to a takeoff in per capita income -- has been very influential in development economics since the 1950s. This was the original justification for foreign aid. The narrative lost credibility for a while but has made a big comeback in the new millennium. Once again it is invoked as a rationale for large foreign aid programs. This paper applies very simple tests to the various elements of the narrative. Evidence to support the narrative is scarce . . .
William Easterly, NYU

How to assess the needs for aid? The answer: Don't ask

The aid community is awash in plans, strategies, and frameworks to meet the very real needs of the world’s poor, complete with cost estimates of “the need for aid.” This paper contends these exercises only make sense in a central planning mentality in which the answer to the tragedies of poverty is a large bureaucratic apparatus to dictate quantities of different development goods and services by administrative fiat. The planning mindset is in turn linked to previously discredited theories, such as that poverty is due to a “poverty trap,” which can only be alleviated by a large inflow of aid to fill a “financing gap” for poor countries. The aid inflow is of course administered by this same planning apparatus . . . 
William Easterly, New York University