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It is widely believed that foreign aid may help conflict-affected countries to recover after the termination of conflicts. However, the available empirical evidence supporting this view largely neglects the heterogeneous nature of aid. Drawing on the conflict database of the Uppsala Conflict Data Program, we address the hypothesis that the effectiveness of post-conflict aid differs between specific sectors. Our focus is on social and economic infrastructure which is most likely to suffer during conflict episodes so that the need for aid is particularly pressing in this area. We find fairly robust evidence that post-conflict aid is effective in improving social infrastructure. In contrast, aid appears to be ineffective in improving economic infrastructure. [ABSTRACT FROM AUTHOR]

Summary It has been intensively and controversially discussed whether “good” economic policies and governance in the recipient countries render foreign aid more effective in alleviating poverty and stimulating economic growth. By contrast, the question of whether aid recipient countries would benefit from stronger income effects if foreign donors provided higher quality aid has received scant attention so far. We make use of the index of donor performance from the Center for Global Development to compare the effects of quality-adjusted aid and unadjusted aid on changes in GDP per capita. Our difference-in-differences analysis reveals significant and quantitatively important treatment effects for quality-adjusted aid after the introduction of the Paris Declaration on Aid Effectiveness in 2005, while we do not find significant treatment effects for unadjusted aid. This implies that only recipient countries with increased aid inflows of high quality benefit in terms of increasing GDP per capita. The quality of aid matters most when accounting for delayed effects. However, our results depend on the sample of recipient countries. [ABSTRACT FROM AUTHOR]

Acknowledging that aid proliferation and a lack of coordination impair aid effectiveness, donors have repeatedly promised to specialize and better coordinate their aid activities, notably in the Paris Declaration of 2005. We exploit data on the exact location of aid projects in Malawi to assess whether the country's bilateral and multilateral donors have acted accordingly at the district and sector level. We do not find compelling evidence for increased aid specialization after the Paris Declaration, and the regional division of labour among donors may even have deteriorated. Our within-country evidence thus broadly corroborates what previous studies have found at the national level of recipient countries. [ABSTRACT FROM AUTHOR]

We argue that donors could improve the effectiveness of foreign aid by pursuing complementary and coherent non-aid policies. In particular, we hypothesize that aid has stronger growth effects if recipients receive more aid from donors who allow for (temporary) worker mobility and (more permanent) migration. We focus on overall remittances paid by the donor countries to proxy for worker mobility and migration. Our empirical results support the hypothesis that higher remittances paid by donor countries strengthen the growth effects of foreign aid. [ABSTRACT FROM AUTHOR]

We construct comprehensive and comparable indices on the most relevant components of economic infrastructure. An unobserved components model is employed to cover the largest possible number of developing and developed countries over the period 1990-2010. We map major findings from the new indices of infrastructure and provide country rankings, which we also compare with subjective assessments of infrastructure in the World Economic Forum's Global Competitiveness Report. Finally, we exemplify possible applications related to trade and foreign aid. By overcoming several data limitations, our new global index can help assess the links between infrastructure and economic development more systematically. [ABSTRACT FROM AUTHOR]

Aid flows continue to be volatile and unpredictable, even though it is widely accepted that this erodes the effectiveness of foreign aid. We argue that fragmented donor-recipient relationships, notably the large number of minor aid relations that tend to be associated with donors' desire to 'fly their flag' around the world, increase aid unpredictability. Our empirical analysis of the determinants of aid unpredictability suggests that aid becomes less predictable with more fragmented donor-recipient relationships. Specifically, the effect of fragmentation on overshooting previous spending plans is statistically significant and substantively important. In contrast, fragmented donor-recipient relationships have no effect on the shortfall of actual aid compared with donors' spending plans. Copyright © 2015 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

We investigate the importance of geo-strategic and commercial motives for the allocation of German aid to 138 countries over the 1973-2010 period. We find that geo-strategic and commercial motives matter. When we relate them to the political color of the German government in general, and the Ministry for Economic Cooperation and Development and the Federal Foreign Office in particular, we find their importance to be at least as strong under the socialist leadership. Socialist leadership decreases the amount of aid commitments, controlled for other factors. [ABSTRACT FROM AUTHOR]

Development assistance has been criticised for a lack of coordination between aid donors. This paper argues that competition for export markets and political support prevents donor countries from coordinating their aid activities between one another. To test these hypotheses, we perform logit and fractional logit estimations for a large sample of recipient countries and aid activities since the early 1970s. Our empirical results reveal that export competition between donors is a major impediment to aid coordination. Although less conclusive, we also find some evidence that donors' competition over political support prevents them from coordinating aid activities more closely. [ABSTRACT FROM AUTHOR]

We address the question of whether foreign aid helps attract foreign direct investment (FDI). This could be achieved if well-targeted aid removed critical impediments to higher FDI inflows. In particular, we test the hypothesis that aid for education is an effective means to increase FDI flows to host countries in Latin America where schooling and education appear to be inadequate from the viewpoint of foreign investors. We employ panel data techniques covering 21 Latin American countries over the period from 1984 to 2008. We find that aid for education has a statistically significant positive effect on FDI. This effect is robust to potential outliers, sample selection within Latin America, alternative specifications and different estimation methods. [ABSTRACT FROM AUTHOR]

Recent studies offer an ambiguous picture on the effectiveness of foreign aid in strengthening the export capacity of recipient countries. Moreover, the literature on aid for trade (AfT) has often neglected the fact that exporters in the donor countries may be among the main beneficiaries. We simultaneously estimate and compare the effects of AfT on trade in both directions. We find that AfT increases recipient exports to donors as well as recipient imports from donors. The first effect tends to dominate the latter, which contradicts the sceptical view that donors grant AfT primarily to promote their own export interests. [ABSTRACT FROM PUBLISHER]

SUMMARY The regional allocation of aid within recipient countries has been largely ignored. We use geocoded data on the location of aid projects financed by the World Bank and the African Development Bank within a sample of 27 recipient countries to assess the claim of donors that their aid targets needy population segments. We also assess whether political leaders in these countries direct aid funds to their home region. We do not find that the multilateral institutions take regional needs into account. Instead, favoritism appears to play an important role for location choices, in particular for physical infrastructure projects. [ABSTRACT FROM AUTHOR]

The Monterrey Consensus agreed at the UN summit on Financing for Development in 2002 promised a breakthrough in terms of donor generosity, aid effectiveness and new means of financing. However, the development orientation of world leaders proved to be short-lived. This is even though our evaluation reveals progress since Monterrey in some areas, notably debt relief and private (FDI) flows. Calls for substantially scaling-up regular aid had less effect than envisaged, and financial innovations have contributed only marginally to overall development financing so far. Nor is there much progress from the perspective of critics focusing on the quality of aid. In particular, the targeting of aid according to need and merit leaves much to be desired. The gap between words and deeds continues to be wide with regard to aid proliferation and donor co-ordination as well. [ABSTRACT FROM AUTHOR]

We assess the determinants of private donations across a large sample of US based NGOs with foreign aid activities. Our results show that donations do not depend in the expected way on publicly available information on NGO characteristics that reveal an efficient and targeted use of funds, notably the efficiency price of NGO aid and the degree of specialisation. Private donors rather rely on the frequently offered option to designate donations to preferred purposes – even though this is unlikely to tie the NGOs' hands. [ABSTRACT FROM PUBLISHER]

Summary We assess the determinants of the wide variation in the efficiency of foreign aid activities across US-based non-governmental organizations ( NGOs). In particular, we analyze whether non-charitable expenditures for administration, management and fundraising depend on the intensity of competition among NGOs and on the degree to which they are refinanced by governments. We control for NGO heterogeneity in various dimensions as well as major characteristics of recipient countries. We find that fiercer competition is associated with more efficient foreign aid activities of NGOs, rather than leading to 'excessive' fundraising. Official funding tends to increase administrative costs. Nevertheless, officially financed NGOs spend relatively more on charitable activities since they are less concerned with collecting private donations through fundraising efforts. [ABSTRACT FROM AUTHOR]

Summary: Major DAC donors are widely criticized for weak targeting of aid, selfish aid motives, and insufficient coordination. The emergence of an increasing number of new donors may further complicate the coordination of international aid efforts. At the same time, it is open to question whether new donors (many of which were aid recipients until recently) are more altruistic and provide better targeted aid according to need and merit. Project-level data on aid by new donors, as collected by the AidData initiative, allow for empirical analyses comparing the allocation behavior of new versus old donors. We employ Probit and Tobit models and test for significant differences in the distribution of aid by new and old donors across recipient countries. We find that, on average, new donors care less for recipient need than old donors. New and old donors behave similarly in several respects, however. They disregard merit by not taking the level of corruption in recipient countries into account. Concerns that commercial self-interest distorts the allocation of aid seem to be overblown for both groups. [ABSTRACT FROM AUTHOR]

Summary: We assess empirically whether foreign official development assistance (ODA) has been effective in alleviating HIV/AIDS epidemics, which figures prominently among the Millennium Development Goals. We employ a difference-in-difference-in-differences approach to identify the treatment effect of ODA specifically meant to fight sexually transmitted diseases on HIV/AIDS-related outcome variables. We do not find that ODA has prevented new infections. The results regarding the medical care of infected people are mixed: evidence on significant treatment effects on AIDS-related deaths exists for the major bilateral source of ODA, the United States, in sharp contrast to ODA from multilateral organizations. [Copyright &y& Elsevier]

We present a two-step approach of assessing whether major donors of foreign aid have met recent demands for less proliferated and better coordinated aid efforts. First, we calculate Theil indices revealing the concentration of each donor's aid on recipient countries and specific aid sectors. Second, we map overlaps of aid from different donors and over time to analyze the degree of coordination. Our results point to a wide and persistent gap between the rhetoric of political declarations and the donors' actual aid allocation during the period 1995-2006. Few donors have specialized on a limited set of recipients and aid sectors, and coordination has remained elusive. Copyright © 2009 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Summary: Empirical evidence on the targeting of private aid is largely lacking, even though corporate donors are an increasingly important source of aid. We contribute to closing this gap by performing a case study of Nestlé. The allocation of Nestlé’s aid is compared to that of Swiss ODA and NGO aid, testing for both altruistic and selfish aid motivations. We conclude that Nestlé’s aid clearly lacks focus in terms of targeting poor countries, which appears to be the downside of the strong link between commercial presence and aid. Moreover, according to our Tobit estimations, Nestlé grants more aid to recipient countries with stronger democratic but also more corrupt institutions. [Copyright &y& Elsevier]

This paper analyses whether aid channelled through non-governmental organisations (NGOs) is less affected by selfish donor motivations and better targeted to needy recipient countries than aid distributed by state agencies. We employ Tobit (and Probit) models and make use of an exceptionally detailed database that allows an assessment of the allocation of Swedish aid channelled through NGOs in comparison to the allocation of Swedish official aid. Our analysis provides mixed results. On the one hand, NGOs appear to be altruistic as far as available indicators on political and commercial motivations of aid can tell. On the other hand, needs-based targeting of aid by NGOs turns out to be surprisingly weak. GDP per capita of recipient countries shapes the allocation of official aid, but not that of aid channelled through NGOs. The headcount of absolute poverty has a significantly positive effect on aid allocation, but its impact is not particularly strong when NGOs are involved. Overall, the Swedish case supports the sceptical view that NGOs are not necessarily superior donors compared to state aid agencies. [ABSTRACT FROM AUTHOR]

We analyze the aid portfolio of various bilateral and multilateral donors, testing whether they have prioritized aid in line with the Millennium Development Goals (MDGs). Employing Tobit models that combine sectorally disaggregated aid data with various indicators reflecting the situation of recipient countries regarding the MDGs, we show that donors differ in the extent to which their sectoral aid allocation is conducive to achieving major MDGs. Some MDGs, notably the fight against HIV/AIDS, have shaped the allocation of aid. However, with respect to other MDGs such as primary education, there is a considerable gap between donor rhetoric and actual aid allocation. This invites the conclusion that the current focus on substantially increasing aid is unlikely to have the desired effects unless the targeting of aid is improved. [ABSTRACT FROM AUTHOR]

The present paper serves as an introduction to this special issue providing a justification for, and linking and introducing to the articles that follow. A central message emanating from the papers included in this special issue is that it is not sufficient to double aid efforts by simply raising and transferring more money. Substantial effort needs to be taken in order to delve deeper into the various routes and transmission mechanisms through which the various types of aid operate. And this is a timely as well as important issue in view of recent calls (as well as concerns) for another “big push” approach in development aid. [ABSTRACT FROM AUTHOR]

The paper applies an alternative approach to assess whether foreign aid promotes economic growth in developing countries, based on the concept of temporary growth accelerations suggested by Hausmann, Pritchett and Rodrik. In addition to aggregate aid, we differentiate between major aid categories, including grants, loans and so-called short-impact aid. It turns out that aid flows have a small but significantly positive effect on the conditional probability of growth accelerations. This result holds across different estimation methods. However, the significance of results crucially depends on the criteria applied to identify growth accelerations. [ABSTRACT FROM AUTHOR]

By reallocating aid to where it is needed most and where a productive use is most likely, donors could help alleviate poverty in developing countries. The rhetoric of donors suggests that this insight has increasingly shaped the allocation of aid. We assess the poverty and policy orientation of bilateral and multilateral aid in different ways. In addition to presenting stylised facts based on bivariate correlations, we apply a Tobit model that captures both altruistic and selfish donor motives. We find little evidence supporting the view that the targeting of aid has improved significantly. Most donors provide higher aid to relatively poor countries, but so far the fight against poverty has not resulted in a stronger focus on needy recipients with favourable local conditions. The estimation results reveal that the policy orientation of aid critically depends on how local conditions are measured. In general, however, donors appear to be less policy-oriented than poverty-oriented. The response of donors to changing institutional and policy conditions in recipient countries turns out to be fairly weak. We reject the proposition that multilateral aid is clearly superior to bilateral aid in terms of rewarding poor countries with better policies and institutions. [ABSTRACT FROM AUTHOR]

For FDI to help alleviate absolute poverty and stimulate economic growth in developing countries, two conditions have to be met. First, developing countries need to be attractive to foreign investors. Second, the host-country environment in which foreign investors operate must be conducive to favourable FDI effects with regard to overall investment, economic spillovers and income growth. This paper argues that it is more difficult to benefit from FDI than to attract FDI. The widely perceived concentration of FDI in few developing countries tends to obscure that, in relative terms, various small and poor countries are fairly attractive to FDI. Yet, the mobilisation of domestic resources remains by far, more important than attracting FDI for financing investment and stimulating economic growth. Furthermore, high inward FDI is no guarantee for poverty alleviation and positive growth effects. In particular, the empirical evidence suggests that host-country conditions typically prevailing in poor countries, including weak institutions and an insufficient endowment of complementary factors of production, constrain the growth-enhancing and poverty-alleviating effects of FDI. The crux is that creating an environment in which FDI may deliver social returns will take considerable time exactly where development needs are most pressing. [ABSTRACT FROM AUTHOR]

Highlights • The Paris Declaration on Aid Effectiveness didn't change donor behavior consistently. • Overall aid concentration generally declined and selectivity weakened. • The poverty orientation of most bilateral donors strengthened slightly. • The allocation of aid did not become more merit-based. • The importance of donor exports for aid allocation did not generally decline. Abstract In the Paris Declaration on Aid Effectiveness of 2005 and related initiatives donor countries promised to render foreign aid more effective, inter alia, by increasingly concentrating aid on particularly needy recipient countries with relatively good governance. In this study, we re-consider the question of whether bilateral and multilateral donors have adjusted their aid allocation accordingly. We track the changes in different margins of Theil indices of aid concentration between 1995–2004 and 2006–2015. We do so for the aggregate aid of the two groups of bilateral DAC donors and multilateral donors as well as for nine major individual DAC donors. According to our findings, the Paris Declaration did not change donors' aid allocation systematically and consistently. Overall aid concentration has declined for the two donor groups as well as for the majority of individual DAC donors. In contrast to multilateral aid, bilateral aid has become slightly more concentrated on poorer recipient countries. Still most donors have become less selective in granting aid to higher income countries. Furthermore, the Paris Declaration did not help improve the merit-based allocation of aid. Finally, there is no compelling evidence suggesting that donors have become less self-interested in using aid as a means to promote their own exports. These results suggest that commitments to reward better governed recipients and not to misuse aid as an export-promotion tool appear to be particularly hard to enforce. Overall, the gap between donor rhetoric and actual aid allocation persists. [ABSTRACT FROM AUTHOR]

Summary Official development assistance (ODA) and foreign direct investment (FDI) are widely perceived to be alternative means of supplementing domestic savings and promoting economic development in low- and middle-income countries. However, possible complementarities of aid and FDI have received limited attention so far. It remains open to debate whether aid could render recipient countries more attractive to FDI by removing specific bottlenecks that prevent higher FDI inflows. In particular, we raise the hypothesis that aid specifically targeted at economic infrastructure helps developing countries attract higher FDI inflows through improving their endowment with infrastructure in transportation, communication, energy, and finance. By performing 3SLS estimations we explicitly account for dependencies between three structural equations on the allocation of sector-specific aid, the determinants of infrastructure, and the determinants of FDI. We find strong and robust evidence that aid in infrastructure is effective in improving the recipient countries’ endowment with infrastructure. In sharp contrast, other aid is not effective in improving infrastructure. Infrastructure consistently proves to be an important determinant of developing countries’ attractiveness to FDI. Consequently, only targeted aid promotes FDI indirectly through the infrastructure channel. In addition, aid in infrastructure has direct effects on FDI. It appears that foreign investors anticipate longer term effects of aid on the country’s endowment with infrastructure and expect aid-financed infrastructure to serve them particularly well. [ABSTRACT FROM AUTHOR]

Summary: We analyze the targeting of non-governmental organization (NGO) aid across countries in a multivariate regression framework, based on a dataset for 61 important international NGOs. While our results show that NGOs are more active in the neediest countries, we reject the hypothesis that NGOs complement official aid through engaging in difficult institutional environments. Rather, they replicate location choices of official “backdonors.” Moreover, NGOs follow other NGOs so that aid gets clustered. Finally, NGOs select recipient countries with common traits related to religion or colonial history. Our findings suggest that NGOs keep a low profile rather than distinguishing themselves from other donors. It remains open to debate, however, whether these findings also apply to the wide variety of smaller NGOs (not covered by our sample). [Copyright &y& Elsevier]