View source for Aid effectiveness

{{Short description|Degree of success or failure of international aid}}
'''Aid effectiveness''' is the degree of success or failure of international [[aid]] ([[development aid]] or [[humanitarian aid]]). Concern with aid effectiveness might be at a high level of generality (whether aid on average fulfils the main functions that aid is supposed to have), or it might be more detailed (considering relative degrees of success between different types of aid in differing circumstances).

Questions of aid effectiveness have been highly contested by academics, commentators and practitioners: there is a large literature on the subject. Econometric studies in the late 20th century often found the average effectiveness of aid to be minimal or even negative. Such studies have appeared on the whole to yield more affirmative results in the early 21st century, but the picture is complex and far from clear in many respects.

Many prescriptions have been made about how to improve aid effectiveness. In 2003–2011 there existed a global movement in the name of aid effectiveness, around four [[high level forums on aid effectiveness]]. These elaborated a set of good practices concerning aid administration co-ordination and relations between donors and recipient countries. The Paris Declaration and other results of these forums embodied a broad consensus on what needed to be done to produce better development results.<ref>{{Cite web |title=Effective development co-operation - OECD |url=http://www.oecd.org/dac/effectiveness/ |access-date=2019-07-04 |website=www.oecd.org}}</ref> From 2011 this movement was subsumed in one concerned more broadly with effective development co-operation, largely embodied by the [[Global Partnership for Effective Development Co-operation]]. 

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== The concept of aid effectiveness ==
Any discussion of "effectiveness" must rely on understandings or assumptions about aims.<ref>{{cite report|url=https://openknowledge.worldbank.org/bitstream/handle/10986/9296/wps4005.pdf|title=What is effective aid? How would donors allocate it?|last1=Kenny|first1=Charles|date=September 2006|publisher=World Bank|pages=2–3|access-date=2021-03-05}}</ref> In public discussions of aid effectiveness, the general aim is usually assumed to be boosting the development of recipient countries and, hence, the well-being of people living in them. But "[[International development|development]]" and "well-being" are complex and slippery concepts. The most popular summary indicator for a country's development is probably average national income per head in its population, but this indicator does not capture inequalities of wealth and power, or the structural characteristics of the country's institutions and economy.<ref>{{Cite book|last=Mahbub ul Haq |display-authors=etal |url=http://hdr.undp.org/sites/default/files/reports/219/hdr_1990_en_complete_nostats.pdf|title=Human Development Report 1990|publisher=UNDP|year=1990|access-date=2021-03-01}}</ref> Since the 1990s the prime purpose of aid has widely been seen as poverty reduction, but this, too, can be interpreted in a variety of ways (How soon? How sustainable? What level?).<ref name=":5">{{Cite web|last=Barder|first=Owen|date=2009|title=What Is Poverty Reduction?|url=https://www.cgdev.org/sites/default/files/1421599_file_Barder_Poverty_Reduction.pdf|url-status=live|website=Centre for Global Development|archive-url=https://web.archive.org/web/20201223173422/https://www.cgdev.org/sites/default/files/1421599_file_Barder_Poverty_Reduction.pdf |archive-date=2020-12-23 }}</ref> Such ambiguities should be clarified or at least borne in mind when considering aid effectiveness.<ref name=":5" />

Under the main international definition of aid – [[Official Development Assistance]] – any self-seeking motives of aid donors are supposed to be strictly subordinate to the objective of promoting the economic development and welfare of developing countries.<ref>{{Cite web|title=Official Development Assistance (ODA)|url=https://www.oecd.org/dac/financing-sustainable-development/development-finance-standards/official-development-assistance.htm|url-status=live|access-date=2021-03-01|website=[[OECD]]|archive-url=https://web.archive.org/web/20190422122947/http://www.oecd.org:80/dac/financing-sustainable-development/development-finance-standards/official-development-assistance.htm |archive-date=2019-04-22 }}</ref> Such motives – which may involve strategic alliances, diplomatic trade-offs, commercial advantages and other political benefits<ref>{{Cite web|last=Kenny|first=Charles|date=2006|title=What Is Effective Aid? How Would Donors Allocate It?|url=https://openknowledge.worldbank.org/bitstream/handle/10986/9296/wps4005.pdf|url-status=live|access-date=2021-03-01|website=[[The World Bank]]|archive-url=https://web.archive.org/web/20211101233334/https://openknowledge.worldbank.org/bitstream/handle/10986/9296/wps4005.pdf |archive-date=2021-11-01 }}</ref> – are nowadays usually discussed as obstacles to aid effectiveness rather than alternative aims.

In the first decade of the 20th century, "aid effectiveness" was the declared focus of a movement joined by major donor and recipient countries and aid-related organisations, involving a series of [[high level forums on aid effectiveness]]. The agenda of this movement was largely about good practices in donor-recipient relationships, and in some cases these good practices became seen as proxies for aid effectiveness.<ref>{{Cite web|last1=Mitchell|first1=Ian|last2=McKee|first2=Caitlin|date=15 November 2018|title=How Do You Measure Aid Quality and Who Ranks Highest?|url=https://www.cgdev.org/blog/how-do-you-measure-aid-quality-and-who-ranks-highest|url-status=live|access-date=2021-03-01|website=[[Center for Global Development]]|archive-url=https://web.archive.org/web/20190510070512/https://www.cgdev.org/blog/how-do-you-measure-aid-quality-and-who-ranks-highest |archive-date=2019-05-10 }}</ref>

==History==
The historical themes of aid effectiveness are rather different for humanitarian aid and developmental aid, so these have been treated in different sections below.

===Development aid effectiveness (historical perspective)===

==== 1945 – early 1970s: Post-war boom ====
Although US aid is widely credited with having hastened the reconstruction of western Europe after World War II, there have been doubts about the effectiveness of this aid. [[George Alexander Duncan|G. A. Duncan]] in 1950 deplored the governmental character of [[Marshall Plan|Marshall Aid]], arguing that private loans could have achieved the economic purposes more efficiently. He acknowledged that the provision of official aid also had other – political – purposes.<ref>{{Cite journal|last=Duncan|first=G. A.|date=1950|title=Marshall Aid|journal=Journal of the Statistical and Social Inquiry Society of Ireland|volume=18|pages=293}}</ref>

When US economic aid shifted from Europe to poorer countries – as initially signalled by [[Harry S. Truman|President Truman]] in [[Point Four Program|Point Four]] of his 1949 inauguration speech – the strategic framework was one of building a "free world" in the face of communist threat. In the 1950s, official US development assistance was mobilized alongside military aid within the [[Mutual Security Act|Mutual Security Program]].<ref>{{Cite journal|last=Haviland|first=H. Field|date=1958|title=Foreign Aid and the Policy Process: 1957|url=https://www.cambridge.org/core/journals/american-political-science-review/article/abs/foreign-aid-and-the-policy-process-1957/0AF9B1AF4123FFF21DF8E06791A51269|journal=American Political Science Review|language=en|volume=52|issue=3|pages=689–724|doi=10.2307/1951900|jstor=1951900 |s2cid=144564474 |issn=1537-5943|url-access=subscription}}</ref> A 1957 Senate Special Committee report admitted it was impossible to prove how effective US aid since World War II had been, but considered that, without it, several countries might have been lost to the [[Soviet Union|Soviet Union's]] sphere of influence.<ref>{{Cite book|last=US Senate Special Committee|title=Report of the special committee to study the foreign aid program|publisher=United States Government Printing Office|year=1957|pages=7–8}}</ref> For greater clarity in future, the committee attempted to distill the purposes of US aid into four:

* The defense need: aid could persuade and enable other nations to be military allies (important for maintaining air bases in distant parts of the world).
* The economic need: aid could bring more nations into a global system of commerce that would benefit the US.
* The political need: aid could be one factor (among many others needed) for helping countries to make "long-range political progress toward freedom" rather than totalitarianism.
* The humanitarian motive, which was seen in responding to "natural disasters or other unexpected conditions".<ref>{{Cite book|last=US Senate Special Committee|title=Report of the special committee to study the foreign aid program|publisher=United States Government Printing Office|year=1957|pages=8–10}}</ref>

The first of these aid drivers could be seen, during the Cold War, as part of a competition with the Soviet Union to win influence.<ref name=":6">{{Cite journal|last=Morgner|first=Aurelius|date=1967|title=The American Foreign Aid Program: Costs, Accomplishments, Alternatives?|url=https://www.jstor.org/stable/1405813|journal=The Review of Politics|volume=29|issue=1|pages=72–73|doi=10.1017/S0034670500023731 |jstor=1405813 |s2cid=145492668 |issn=0034-6705|url-access=subscription}}</ref> But aid was often observed to fail in this respect; for instance, in the 1950s and 1960s Egypt and Afghanistan took aid from both sides without making a decisive commitment either way, and large Russian support to China and Indonesia did not prevent those countries' leaders turning against their former patron.<ref name=":6" />

A more detailed theory about the kinds of effect and the causal paths through which aid could be effective was developed by [[Max Millikan]] and [[Walt Whitman Rostow|Walt Rostow]] in the mid- to late-1950s, expressed in [[iarchive:proposalkeytoeff0000mill|"A Proposal"]] of 1956. This propounded that aid in the form of investment funds could promote the "take-off" of economies into self-reliant growth. It further suggested that this economic transformation, channeled properly, could produce a free and democratic type of society by providing: a constructive outlet for nationalism; a social solvent by interesting the urban elites in a dynamic agricultural sector; a stimulus for the emergence of authentic leaders; incentives for the attitudes of political responsibility needed to support democratisation; and feelings of international solidarity.<ref>{{Cite book|last=Millikan|first=Max F|title=A proposal: Key to an effective foreign policy|publisher=Harper & Brothers|year=1957|location=New York}}</ref> Rostow later elaborated the "take-off" theory of development in his more famous work, [[iarchive:stagesofeconomic00rost|"The Stages of Economic Growth"]], in which he stated that greatly increased economic aid was needed in order to outrace the effects of population growth.<ref>{{Cite book|last=Rostow|first=W. W.|title=The Stages of Economic Growth|publisher=Cambridge University Press|year=1962|pages=143}}</ref>

In 1966, [[Hollis B. Chenery|Hollis Chenery]] and Alan Strout published a still more sophisticated and influential macro-economic model of the way aid could boost development.<ref name=":7">{{Cite journal|last1=Chenery|first1=Hollis B.|last2=Strout|first2=Alan M.|date=1966|title=Foreign Assistance and Economic Development|url=https://www.jstor.org/stable/1813524|journal=The American Economic Review|volume=56|issue=4|pages=679–733|jstor=1813524 |issn=0002-8282}}</ref> It involved identifying for each country whether the bottlenecks to economic growth lay in the availability of skills, domestic savings, or export earnings. In this way, an appropriate mix of technical assistance, grants or loans could be decided. The focus was on achieving a target level of [[Gross national income|GNP]] growth, which helped consolidate this as the prime indicator of aid effectiveness. At this time Chenery and Strout pointed to the Philippines, Taiwan, Greece and Israel as examples of countries that seemed to have achieved self-sustaining growth rates with the help of aid.<ref name=":7" />

==== Early 1970s – mid-1990s: The rise of neoliberalism ====
The end of the [[Post–World War II economic expansion|post-war boom]] – marked particularly by the [[1973 oil crisis|oil crisis of 1973]] – was a watershed in attitudes to aid effectiveness, as it forced a reappraisal of the existing models.<ref>{{Cite book|last=Riddell|first=Roger|url=https://www.worldcat.org/oclc/15630613|title=Foreign aid reconsidered|date=1987|publisher=Johns Hopkins University Press|isbn=0-8018-3546-1|location=Baltimore|pages=92–95|oclc=15630613}}</ref>

In the 1980s and 1990s NGOs played a greater part in international aid.<ref>Lewis D. (2010) [https://pdfs.semanticscholar.org/5b42/5f2c896991e5ab7fce43ccd1fb9b9c1bf439.pdf "Nongovernmental Organizations, Definition and History"] {{small|(PDF)}}. In: Anheier H.K., Toepler S. (eds) ''International Encyclopedia of Civil Society''. Springer, New York, NY.</ref>

After the end of the Cold War, the declared focus of official aid began to move further towards the alleviation of poverty and the promotion of development. The countries that were in the most need and poverty became more of a priority. Once the Cold War ended, Western donors were able to enforce aid conditionality better because they no longer had geopolitical interests in recipient countries. This allowed donors to condition aid on the basis that recipient governments make economic changes as well as democratic changes.<ref>Dunning, Thad. "Conditioning the Effects of Aid: Cold War Politics, Donor Credibility, and Democracy in Africa." International Organization 58.02 (2004)</ref> It is against this background that the international aid effectiveness movement began taking shape in the late 1990s as donor governments and aid agencies began working together to improve effectiveness.

==== Late 1990s onward: Millennial partnerships ====

=====''The global "effectiveness" movement''=====
{{Main|High level forums on aid effectiveness|Global Partnership for Effective Development Co-operation}}
Aid effectiveness became more strongly recognized as a global multilateral objective in 2002 at the International Conference on Financing for Development in Monterrey, Mexico, which established the [[Monterrey Consensus]].<ref>{{cite web|title=International Conference on Financing for Development|url=https://www.un.org/esa/ffd/ffdconf|access-date=2012-12-26|publisher=Un.org}}</ref> There, the international community agreed to increase its funding for development—but acknowledged that more money alone was not enough. Donors and developing countries alike wanted to know that aid would be used as effectively as possible. They wanted it to play its optimum role in helping poor countries achieve the [[Millennium Development Goals]], the set of targets agreed by 192 countries in 2000 which aimed to halve world poverty by 2015. Over the following nine years, a process punctuated by four [[high level forums on aid effectiveness]] (Rome 2003, Paris 2005, Accra 2008 and Busan 2011) consolidated a set of recognised good practices in aid effectiveness, and a framework for monitoring them.

In 2011 the dominant global agenda on "aid effectiveness" was subsumed in a broader movement for "effective development cooperation". This was embodied in the [[Global Partnership for Effective Development Co-operation]] (GPEDC) mandated at the Fourth High-Level Forum on Aid Effectiveness in Busan in 2011. GPEDC endorsed the prior "aid effectiveness" principles and commitments, and added others more widely concerned with development cooperation.

Another global partnership that follows the "effective development cooperation" approach is [https://www.uhc2030.org/ UHC2030] (the International Health Partnership for Universal Health Care 2030), formerly known simply as the [[International Health Partnership]] (or IHP+).<ref>{{Cite web|title=uhc2030: History|url=https://www.uhc2030.org/about-us/history/|url-status=live|access-date=2021-02-27|website=UHC2030|archive-url=https://web.archive.org/web/20171001032849/https://www.uhc2030.org/about-us/history/ |archive-date=2017-10-01 }}</ref><ref>{{Cite web|title=IHP+ Strategic Directions 2016-17|url=https://www.uhc2030.org/fileadmin/uploads/ihp/Documents/About_IHP_/mgt_arrangemts___docs/Core_Team/IHP_Strategic_Approach_2016-2017.PDF|access-date=2021-02-27|website=uhc2030}}</ref>

See below for more details of the aid effectiveness principles and practices advocated by this movement and its component partnerships.

=== Humanitarian aid effectiveness (historical perspective) ===
Widespread famine in [[Biafra]] during the [[Nigerian Civil War]] (1967–1970) led to greater [[Non-government organisation|NGO]] involvement in events like the [[Biafran airlift]] being attempted for the first time.<ref>{{cite journal|last1=Omaka|first1=Arua Oko|date=1 June 2016|title=Humanitarian Action: The Joint Church Aid and Health Care Intervention in the Nigeria-Biafra War, 1967–1970|journal=Canadian Journal of History|volume=49|issue=3|pages=423–227|doi=10.3138/cjh.49.3.423}}</ref> The way in which aid was allocated during the [[1983–1985 famine in Ethiopia]] forever changed the way in which governments and NGOs respond to international emergencies taking place within conflict situations and raised disturbing questions about the relationship between humanitarian agencies and host governments.<ref>{{cite book|last1=Waal|first1=Alexander De|url=https://archive.org/details/bub_gb_RcVFXUwraxsC|title=Evil Days: Thirty Years of War and Famine in Ethiopia|date=1991|publisher=Human Rights Watch|isbn=9781564320384|page=[https://archive.org/details/bub_gb_RcVFXUwraxsC/page/n268 2]}}</ref>

==Findings and critiques on aid effectiveness==

{{See also|Aid#Criticism}}There is wide agreement that aid alone is not enough to lift developing countries out of poverty and that it is not the most powerful potential instrument for promoting this end. The debates on aid effectiveness are over the degree of significance of aid's effects, the extent of its unfavourable effects, and the relative effectiveness of different kinds of aid.

=== Major critiques ===

==== P. T. Bauer ====
British economist [[Peter Thomas Bauer|P. T. Bauer]] argued that aid did more harm than good, notably in his books "Dissent on Development" (1972)<ref>{{Cite book|last=Bauer|first=P. T.|url=https://www.worldcat.org/oclc/2666082|title=Dissent on development|date=1976|publisher=Harvard University Press|isbn=0-674-21282-7|location=Cambridge, Mass.|oclc=2666082}}</ref> and "Reality and Rhetoric" (1984).<ref>{{Cite book|last=Bauer|first=P. T.|url=https://archive.org/details/realityrhetorics0000baue/|title=Reality and rhetoric : studies in the economics of development|date=1984|publisher=Harvard University Press|isbn=0-674-74946-4|location=Cambridge, Mass.|oclc=9894295}}</ref> The main harmful effect was that aid channelled resources through governments, enabling inefficient state planning and producing a general "politicization of life" in which the population shifted its activities to the political sphere rather than the economic one.<ref name=":3">{{Cite book|last=Bauer|first=P. T.|url=https://archive.org/details/realityrhetorics0000baue/page/46|title=Reality and rhetoric : studies in the economics of development|date=1984|publisher=Harvard University Press|isbn=0-674-74946-4|location=Cambridge, Mass.|pages=27–28, 46|oclc=9894295}}</ref> On the other side, Bauer saw aid's benefits as being limited to the avoidance of commercial loan costs, which he did not consider to be a significant factor in countries' development (pp.&nbsp;47–49). He believed that the choices of aid projects were usually controlled by recipient governments less interested in alleviating poverty than enriching the elite (pp.&nbsp;49–52).

==== Dambisa Moyo ====
Noted Zambian economist [[Dambisa Moyo]] has been a fierce opponent to development aid, and calls it “the single worst decision of modern developmental politics”. Her 2009 book, [[Dambisa Moyo|Dead Aid]] describes how aid has encouraged kleptocracies, corruption, aid-dependency and a series of detrimental economic effects and vicious downward spirals of development in Africa. She argues that foreign aid provides a windfall to governments which can encourage extreme forms of [[rent-seeking]] and through providing a positive shock of revenue, lead to [[Dutch Disease]]. Furthermore, this easy money offers governments an exit from the contract between them and their electorate: the contract that states that they must provide public goods in exchange for taxes.  In short, it "allows the state to abdicate its responsibilities toward its people".<ref>{{cite book|last=Moyo|first=Dambisa|title=Aid: Why Aid Is Not Working and How There Is a Better Way for Africa.|publisher=Douglas & Mcintyre|year=2009|isbn=978-1-55365-542-8}}</ref> It is important to note that Moyo alludes specifically to government bilateral and multilateral aid and not small-holder charity, humanitarian or emergency aid.
Her prescriptions call for increased trade and foreign direct investment, emphasizing China's burgeoning role in Africa.<ref>{{cite book|last=Moyo|first=Dambisa|title=Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa|publisher=Douglas & Mcintyre|year=2009|pages=124}}</ref>  Moyo also makes a case for micro-financing schemes, as popularized by the widespread success of Grameen Bank, to spark entrepreneurship within the continent on the ground level, thus building from the bottom-up as opposed to the top-down approach aid takes.

=== Econometric Studies ===
Many econometric studies have attempted to establish broad conclusions about aid, using regression analysis on a panel of recipient countries (seeing if their differing amounts and timings of aid received could be correlated with development indicators). These have created a mixed picture on the average effectiveness of aid, but one in which pessimism in the late 20th century has seemed to yield to qualified optimism in the early 21st century.<ref>{{Cite journal|last1=Mahembe|first1=Edmore|last2=Odhiambo|first2=Nicholas M.|date=2019-01-01|editor-last=Read|editor-first=Robert|title=Foreign aid and poverty reduction: A review of international literature|journal=Cogent Social Sciences|language=en|volume=5|issue=1|pages=1625741|doi=10.1080/23311886.2019.1625741|issn=2331-1886|doi-access=free}}</ref> See the table in the sub-section on "Major econometric studies and their findings", below.

==== Challenges for measurement ====
It must be borne in mind that such econometric studies face many problems. One challenge for assessing the effectiveness of aid is that aid is intended to serve a variety of purposes: some of it is aimed primarily at poverty alleviation, some at economic growth, and some at other objectives such as better governance or reduction of social inequalities. Often it is not very clear what objectives are foremost, making it hard to measure results against intentions.<ref>{{cite journal|last=Barder|first=Owen|date=2009-04-21|title=What is Poverty Reduction?|url=http://www.cgdev.org/content/publications/detail/1421599|journal=CGD Working Papers|access-date=2010-06-02}}</ref> Roodman (2007), for instance, discovered that the results of seven previous econometric studies – including the very influential one by Burnside and Dollar (1997, 2000) – could not survive defining key terms in other plausible ways.<ref>{{cite journal|last=Roodman|first=David|year=2007|title=The Anarchy of Numbers: Aid, Development and Cross-Country Empirics|journal=The World Bank Economic Review|volume=21|issue=2|pages=255–277|doi=10.1093/wber/lhm004|hdl-access=free|s2cid=14359188|hdl=10.1093/wber/lhm004}}</ref> Moreover, different objectives have different implications for the time-scale in which results should be sought.<ref name=":0">{{Cite journal|last=Clemens MA|display-authors=etal|date=2011|title=Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth|journal=The Economic Journal|volume=122|issue=561|pages=590–617|doi=10.1111/j.1468-0297.2011.02482.x|doi-access=free}}</ref> Varying sectors and modalities of aid have different effects, as do the contextual factors in recipient countries.<ref name=":1">{{Cite journal|last=Petrikova|first=Ivica|date=2015|title=Aid for food security: does it work?|url=https://researchportal.port.ac.uk/ws/files/3106941/Petrikova_2015_IJDI.pdf|journal=International Journal of Development Issues|volume=14|pages=41–59|doi=10.1108/IJDI-07-2014-0058}}</ref> However, increasingly sophisticated analyses have made progress in accounting for these complicated effects.<ref name=":0" /><ref name=":1" />

Econometric studies frequently show more pessimistic results than might be expected from the accumulation of successes reported by donor and implementing agencies in their projects and programs. Paul Mosley termed this the '''micro-macro paradox''' and offered three potential explanations: inaccurate measurement, fungibility, and "backwash" or negative side-effects of component aid projects.<ref>{{cite book|last=Mosley|first=Paul|url=https://archive.org/details/foreignaiditsdef0000mosl|title=Foreign Aid: Its Defense and Reform|publisher=University Press of Kentucky|year=1987|isbn=978-0-8131-1608-2|quote=Paul Mosley.|access-date=December 7, 2009|url-access=registration}}</ref> The micro-macro paradox has also been attributed to inadequate assessment practices. For example, conventional assessment techniques often over-emphasize inputs and outputs without taking sufficient account of societal impacts. The shortcomings of prevalent assessment practices have led to a gradual international trend towards more rigorous methods of impact assessment.<ref>{{cite journal|last=Faust|first=Jörg|year=2009|title=Reliable evidence of impact|url=http://www.inwent.org/ez/articles/084417/index.en.shtml|url-status=dead|journal=Development and Cooperation|volume=36|issue=1|pages=14–17|archive-url=https://web.archive.org/web/20100227005515/http://www.inwent.org/ez/articles/084417/index.en.shtml|archive-date=2010-02-27}}</ref>

==== Major econometric studies and their findings ====
The main findings of major econometric studies are summarized in the following table.
{{alternating rows table|class=wikitable}}
|+ Table of econometric studies on aid effectiveness
! Author/year<ref>Bibliographic reference to be given in a note</ref>
! Period
! Findings on aid effectiveness;
|-
|Mosley 1987<ref>{{Cite book|last=Mosley|first=Paul|url=https://www.worldcat.org/oclc/14240724|title=Foreign aid, its defense and reform|date=1987|publisher=University Press of Kentucky|isbn=0-8131-1608-2|location=Lexington, Ky.|oclc=14240724}}</ref>
|1960-1980
|Aid had no significant effect on economic growth. The reason seemed to be fungibility: aid likely released other resources for unproductive uses.
|-
|Boone 1996<ref>{{cite report|url=https://www.nber.org/system/files/working_papers/w5308/w5308.pdf|title=Politics and the effectiveness of foreign aid|last1=Boone|first1=Peter|date=1995|publisher=National Bureau of Economic Research|access-date=2021-02-19}}</ref><ref>A similar version was published as {{Cite journal|last=Boone|first=Peter|date=1996|title=Politics and the effectiveness of foreign aid|journal=European Economic Review|volume=40|issue=2 |pages=289–329|doi=10.1016/0014-2921(95)00127-1 |s2cid=154155908 |url=http://cep.lse.ac.uk/pubs/download/DP0272.pdf |via=Science Direct}}</ref>
| 1971-1990
| Aid had no clear effect on rates of [[infant mortality]] and [[primary education]].
|-
|Burnside and Dollar 1997,<ref>{{cite report|url=http://documents1.worldbank.org/curated/en/698901468739531893/pdf/multi-page.pdf|title=Aid, policies and growth|last1=Burnside|first1=Craig|last2=Dollar|first2=David|date=1997|publisher=World Bank|access-date=2021-02-20}}</ref> 2000<ref>{{Cite journal|last1=Burnside|first1=Craig|last2=Dollar|first2=David|date=September 2000|title=Aid, Policies, and Growth|url=https://www.aeaweb.org/articles?id=10.1257/aer.90.4.847|journal=American Economic Review|language=en|volume=90|issue=4|pages=847–868|doi=10.1257/aer.90.4.847|s2cid=14261087 |issn=0002-8282|url-access=subscription}}</ref>
|1970-1993
|Aid had a positive impact on growth in developing countries with good policies. But the overall effect of aid was unclear because donors did not especially target such countries.
|-
|Svensson 1999<ref>{{Cite journal|last=Svensson|first=J.|date=1999|title=Aid, Growth and Democracy|url=https://onlinelibrary.wiley.com/doi/abs/10.1111/1468-0343.00062|journal=Economics & Politics|language=en|volume=11|issue=3|pages=275–297|doi=10.1111/1468-0343.00062|issn=1468-0343|url-access=subscription}}</ref>
|1980s, 1990s
|Aid had a positive impact on growth in more democratic countries. But aid on average was not channeled to more democratic countries.
|-
| Arvin and Borillas 2002<ref>{{Cite journal|last1=Arvin|first1=B. Mak|last2=Barillas|first2=Francisco|date=2002-11-01|title=Foreign aid, poverty reduction, and democracy|url=https://doi.org/10.1080/00036840210136718|journal=Applied Economics|volume=34|issue=17|pages=2151–2156|doi=10.1080/00036840210136718|s2cid=154546476 |issn=0003-6846|url-access=subscription}}</ref>
|1975-1998
|Aid had no clear effect on [[Gross national income|GNP]] per capita.
|-
|Kosack 2003<ref>{{Cite journal|last=Kosack|first=Stephen|date=2003-01-01|title=Effective Aid: How Democracy Allows Development Aid to Improve the Quality of Life|url=https://www.sciencedirect.com/science/article/pii/S0305750X02001778|journal=World Development|language=en|volume=31|issue=1|pages=1–22|doi=10.1016/S0305-750X(02)00177-8|issn=0305-750X|url-access=subscription}}</ref>
|1974-1985
|Aid had no clear effect on average, but improved the quality of life when combined with democracy.
|-
|Dunning 2004 <ref>{{Cite journal|last=Dunning|first=Thad|date=2004|title=Conditioning the Effects of Aid: Cold War Politics, Donor Credibility, and Democracy in Africa|url=https://www.cambridge.org/core/journals/international-organization/article/abs/conditioning-the-effects-of-aid-cold-war-politics-donor-credibility-and-democracy-in-africa/08C903F1F4E5C33D0F7E50B6EB7EB8E9|journal=International Organization|language=en|volume=58|issue=2|pages=409–423|doi=10.1017/S0020818304582073|doi-broken-date=2 December 2024 |s2cid=154368924 |issn=1531-5088|url-access=subscription}}</ref>
|1975-1997
|In the first few years after the Cold War foreign aid produced a small positive effect on democracy in sub-Saharan African countries, unlike in the previous 15 years.
|-
|Easterly et al. 2004<ref>{{Cite journal|last1=Easterly|first1=William|last2=Levine|first2=Ross|last3=Roodman|first3=David|date=2004-05-01|title=Aid, Policies, and Growth: Comment|url=https://pubs.aeaweb.org/doi/10.1257/0002828041464560|journal=American Economic Review|language=en|volume=94|issue=3|pages=774–780|doi=10.1257/0002828041464560|issn=0002-8282|url-access=subscription}}</ref>
|1970-1997
|The finding of Burnside and Dollar (2000, see above) is not robust to different definitions of aid and good policy.
|-
| Mosley et al. 2004<ref>{{Cite journal|last1=Mosley|first1=Paul|last2=Hudson|first2=John|last3=Verschoor|first3=Arjan|date=2004-06-01|title=Aid, Poverty Reduction and the 'New Conditionality'|url=https://academic.oup.com/ej/article/114/496/F217/5089279|journal=The Economic Journal|language=en|volume=114|issue=496|pages=F217–F243|doi=10.1111/j.1468-0297.2004.00220.x|s2cid=55919902 |issn=0013-0133|url-access=subscription}}</ref>
|1980-2000
|Aid increased pro-poor public spending in low-income countries.
|-
|Rajan and Subramanian 2005 <ref>{{cite report|url=https://www.nber.org/system/files/working_papers/w11513/w11513.pdf|title=Aid and growth: What does the cross-country evidence really show?|last1=Rajan|first1=Raghuram G.|last2=Subramanian|first2=Arvind|date=2005|publisher=National Bureau of Economic Research|access-date=2021-02-23}}</ref>
|1960-2000
|There was on average no robust positive relationship between aid and growth.
|-
|Yontcheva and Masud 2005<ref>{{cite report|url=https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Does-Foreign-Aid-Reduce-Poverty-Empirical-Evidence-from-Nongovernmental-and-Bilateral-Aid-17973#:~:text=Empirical%20Evidence%20from%20Nongovernmental%20and%20Bilateral%20Aid,-Author%2FEditor%3A&text=Summary%3A,impact%20on%20human%20development%20indicators.&text=Our%20results%20show%20that%20NGO,effectively%20than%20official%20bilateral%20aid.|title=Does Foreign Aid Reduce Poverty? Empirical Evidence from Nongovernmental and Bilateral Aid|last1=Yontcheva|first1=Boriana|last2=Masud|first2=Nadia|date=2005|publisher=IMF|access-date=2021-02-19}}</ref>
|1990-2001
|Aid by [[Non-governmental organization|NGOs]] co-financed by the [[European Commission]] reduced infant mortality but bilateral aid generally did not.
|-
|Calderon et al. 2006<ref>{{cite report|url=https://publications.iadb.org/publications/english/document/Foreign-Aid-Income-Inequality-and-Poverty.pdf|title=Foreign aid, income inequality, and poverty|last1=Calderon|first1=Mark|last2=Chong|first2=Alberto|date=2006|publisher=Inter-American Development Bank|last3=Gradstein|access-date=2021-02-20}}</ref><ref>A similar version was published as {{Cite journal|last1=Chong|first1=Alberto|last2=Gradstein|first2=Mark|last3=Calderon|first3=Cecilia|date=2009-07-01|title=Can foreign aid reduce income inequality and poverty?|url=https://doi.org/10.1007/s11127-009-9412-4|journal=Public Choice|language=en|volume=140|issue=1|pages=59–84|doi=10.1007/s11127-009-9412-4|s2cid=154071767 |issn=1573-7101|url-access=subscription}}</ref>
|1971–2002
|Aid had no clear effect on poverty, inequality, economic growth or democratic institutions.
|-
|Mosley and Suleiman 2007<ref>{{Cite journal|last1=Mosley|first1=Paul|last2=Suleiman|first2=Abrar|date=2007|title=Aid, Agriculture and Poverty in Developing Countries|url=https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-9361.2006.00354.x|journal=Review of Development Economics|language=en|volume=11|issue=1|pages=139–158|doi=10.1111/j.1467-9361.2006.00354.x|s2cid=154905396 |issn=1467-9361|url-access=subscription}}</ref>
|1980-2002
|Aid most effectively reduced poverty when it supported public expenditures on agriculture, education and infrastructure.
|-
|Bahmani-Oskooee and Oyolola 2009<ref>{{Cite journal|last1=Bahmani-Oskooee|first1=Mohsen|last2=Oyolola|first2=Maharouf|date=2009-01-01|title=Poverty reduction and aid: cross-country evidence|url=https://doi.org/10.1108/01443330910965796|journal=International Journal of Sociology and Social Policy|volume=29|issue=5/6|pages=264–273|doi=10.1108/01443330910965796|issn=0144-333X|url-access=subscription}}</ref>
|1981-2002
|Aid was on average effective in reducing poverty.
|-
|Clemens et al. 2011<ref>{{Cite journal|last1=Clemens|first1=Michael A.|last2=Radelet|first2=Steven|last3=Bhavnani|first3=Rikhil R.|last4=Bazzi|first4=Samuel|date=2012-06-01|title=Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth|journal=The Economic Journal|language=en|volume=122|issue=561|pages=590–617|doi=10.1111/j.1468-0297.2011.02482.x|issn=0013-0133|doi-access=free}}</ref>
|1970-2000
|Aid had a modest positive effect on economic growth.<ref>The study re-analyzed data from Boone (1996), Burnside and Dollar (2000), and Rajan and Subramanian (2008), treating time-lags differently.</ref>
|-
|Alvi and Senbeta 2012<ref>{{Cite journal|last1=Alvi|first1=Eskander|last2=Senbeta|first2=Aberra|date=2012|title=Does Foreign Aid Reduce Poverty?|url=https://onlinelibrary.wiley.com/doi/abs/10.1002/jid.1790|journal=Journal of International Development|language=en|volume=24|issue=8|pages=955–976|doi=10.1002/jid.1790|issn=1099-1328|url-access=subscription}}</ref>
|1981-2004
|Aid—especially multilateral aid—significantly reduced poverty.
|-
|Kaya et al. 2013<ref>{{Cite journal|last1=Kaya|first1=Ozgur|last2=Kaya|first2=Ilker|last3=Gunter|first3=Lewell|date=2013|title=Foreign Aid and the Quest for Poverty Reduction: Is Aid to Agriculture Effective?|url=https://onlinelibrary.wiley.com/doi/abs/10.1111/1477-9552.12023|journal=Journal of Agricultural Economics|language=en|volume=64|issue=3|pages=583–596|doi=10.1111/1477-9552.12023|issn=1477-9552|url-access=subscription}}</ref>
|1980-2003
|Aid to agriculture significantly reduced poverty.
|-
|Hirano and Otsubo 2014<ref>{{cite report|url=https://openknowledge.worldbank.org/handle/10986/19397|title=Aid Is Good for the Poor|last1=Hirano|first1=Yumeka|last2=Otsubo|first2=Shigero|date=2014|publisher=World Bank|access-date=2021-02-20}}</ref>
|1990s, 2000s
|Social aid directly benefitted the poorest in society, while economic aid increased the income of the poor through growth.
|-
|Nunn and Qian 2014<ref>{{Cite journal|last1=Nunn|first1=Nathan|last2=Qian|first2=Nancy|date=2014-06-01|title=US Food Aid and Civil Conflict|url=https://pubs.aeaweb.org/doi/10.1257/aer.104.6.1630|journal=American Economic Review|language=en|volume=104|issue=6|pages=1630–1666|doi=10.1257/aer.104.6.1630|s2cid=12935268 |issn=0002-8282}}</ref>
|1971-2006
|U.S. food aid increased the incidence and duration of civil conflicts, but had no robust effect on inter-state conflicts or the onset of civil conflicts.<ref>Nunn and Qian acknowledged that such aid might also have other, possibly beneficial, effects</ref>
|-
|Arndt et al 2015<ref>{{Cite journal|date=2015-05-01|title=Assessing Foreign Aid's Long-Run Contribution to Growth and Development|journal=World Development|language=en|volume=69|pages=6–18|doi=10.1016/j.worlddev.2013.12.016|issn=0305-750X|doi-access=free|last1=Arndt |first1=Channing |last2=Jones |first2=Sam |last3=Tarp |first3=Finn }}</ref>
|1970-2007
|Aid moderately stimulated growth, promoted structural change, improved social indicators, and reduced poverty.
|-
|Petrikova 2015
|1994-2011
|Aid had a small positive effect on food security
|-
|Janjua et al. 2018<ref>{{Cite journal|last1=Janjua|first1=Pervez Zamurrad|last2=Muhammad|first2=Malik|last3=Usman|first3=Muhammad|date=2018-06-01|title=Impact of Project and Programme Aid on Economic Growth: A Cross Country Analysis|url=http://www.thepdr.pk/pdr/index.php/pdr/article/view/2780|journal=The Pakistan Development Review|language=en-US|volume=57|issue=2|pages=145–174|doi=10.30541/v57i2pp.145-174|doi-broken-date=1 November 2024 |issn=0030-9729|doi-access=free|url-access=subscription}}</ref>
|1995-2009
|Project aid had a significant effect on economic growth. Programme aid had a significant effect on social development.
|-
|Abellán and Alonso 2022<ref>{{Cite journal|last1=Abellán|first1=Javier|last2=Alonso|first2=José Antonio|date=2022|title=Promoting global access to water and sanitation: A supply and demand perspective|url=https://www.researchgate.net/publication/358066020|journal=Water Resources and Economics|language=en|volume=38|issue=|pages=100194|doi=10.1016/j.wre.2022.100194|s2cid=246261266 |doi-access=|bibcode=2022WRE....3800194A }}</ref>
|1990-2015
|Aid had a positive effect on access to safe drinking water, this effect being especially important when consistent long-term investments are put into place.
|-
|}

=== Analyses of factors limiting aid effectiveness ===

==== Aid fragmentation ====
Aid flows significantly increased in the first decade of the 21st century, but at the same time aid has become increasingly fragmented. There was an explosion in the number of donors, and while the number of projects multiplied, their average size dropped. Small projects being often limited in size, scope and duration, they resulted in little lasting benefit beyond the immediate effect.<ref>Fengler, M.G and Kharas, H. ''Delivering Aid Differently: Lesson from the Field''. Brookings Institution, Washington D.C. 2010.</ref> With more players, aid became less predictable, less transparent and more volatile.<ref>Kharas, H., Makino, K., Jung, W. ''Catalizing Development''. Brookings Institution Press, Washington D.C. 2011</ref>

Fragmentation means an increase in costs for recipient countries, as government offices are forced to divert administrative resources to cope with requests and meetings with donors<ref>As an example, in 2005, government authorities in Vietnam received 791 missions from donors, which means more than two a day, including weekends and holidays. See, for example, OECD, DAC, "The Challenge of Capacity Development: Working Towards Good Practice", Paris, 2006.</ref> Decades of development have shown that if countries are to become less dependent on aid, they must follow a bottom-up approach, where they determine their own priorities and rely on their own systems to deliver that aid.<ref>Deutscher, E., and Fyson, S., "Improving the Effectiveness of Aid", ''Finance and Development'', Vol. 25, n. 3, The International Monetary Fund, September 2008.</ref>

==== Volatility/unpredictability of aid ====
Information, at the donors' as well at the recipients' level, is often poor, incomplete and difficult to compare with other data, and beneficiaries' feedback and formal project evaluations are rare. Aid is predictable when partner countries can be confident about the amount and the timing of aid disbursement. Not being predictable has a cost: one study assessed the [[deadweight loss]] associated with volatility at an average of 10% to 20% of a developing country's programmable aid from the European Union in recent years.<ref name=":2">Kharas, H. "Measuring the Cost of Aid Volatility". Wolfensohn Centre for Development, Working Parper 3, Brookings Institution, Washington D.C. 2008</ref>

==== Reducing the accountability of governments ====
Revenue generation is one of the essential pillars for developing [[state capacity]]. Effective taxation methods allow a state to provide public goods and services, from ensuring justice to providing education.<ref>{{Cite journal|last=Bräutigam|first=Deborah|date=2002|title=Building Leviathan: Revenue, State Capacity and Governance|url=https://deborahbrautigam.files.wordpress.com/2013/04/2002-building-leviathan.pdf|journal=IDS Bulletin|volume= 33| issue = 3|pages=1–17|doi=10.1111/j.1759-5436.2002.tb00034.x}}</ref> Taxation simultaneously serves as a government accountability mechanism, building state-citizen relationships, as citizens can now expect such service provisions upon their consent to taxation. For developing and fragile states that lack such revenue capabilities, while aid can be a seemingly necessary alternative, it has the potential to undermine institutional development. States that rely on higher percentages of aid for government revenue are less accountable to their citizens by avoiding the state-citizen relationships that taxation builds and face fewer incentives to develop public institutions.<ref>{{Cite news|url=https://www.cgdev.org/publication/aid-institutions-paradox-review-essay-aid-dependency-and-state-building-sub-saharan|title=An Aid-Institutions Paradox? A Review Essay on Aid Dependency and State Building in Sub-Saharan Africa- Working Paper 74|work=Center For Global Development|access-date=2017-05-17|language=en}}</ref> The limited government capacity resulting from subpar institutional presence and effectiveness leads to: “ubiquitous corruption of state officials, large gaps between the law and actual practice in business regulation, workers who do not even show up, doctors that do not doctor, teachers who do not teach.”<ref>{{Cite journal|last1=Pritchett|first1=Lant|last2=Woolcock|first2=Michael|last3=Andrews|first3=Matt|date=2013-01-01|title=Looking Like a State: Techniques of Persistent Failure in State Capability for Implementation|journal=The Journal of Development Studies|volume=49|issue=1|pages=1–18|doi=10.1080/00220388.2012.709614|s2cid=14363040|issn=0022-0388|url=https://www.hks.harvard.edu/sites/default/files/centers/cid/files/publications/faculty-working-papers/239_PritchettWoolcockAndrews_Looking_like_a_state_final.pdf}}</ref>

In the view of [[James Shikwati]], aid in Africa sustains political elites who implement a colonial or neo-colonial agenda of subsidy and distortion of markets which holds African countries back.<ref name=":4">{{cite journal|last=Shikwati|first=James|year=2006|title=The Future of Africa in the World|url=http://www.irenkenya.com/modules/articles/index.php?article_title_id=18|url-status=dead|journal=Inter Region Economic Network|pages=6|archive-url=https://web.archive.org/web/20130617124226/http://www.irenkenya.com/modules/articles/index.php?article_title_id=18|archive-date=2013-06-17}}</ref>

====The tying of aid====
[[Tied aid]] is defined as project aid contracted by source to private firms in the donor country. It refers to aid tied to goods and services supplied exclusively by donor country businesses or agencies. Tied aid increases the cost of assistance and has the tendency of making donors to focus more on the commercial advancement of their countries than what developing countries need. There are many ways aid can be designed to pursue the commercial objectives of donors. One of such pervasive means is by insisting on donor country products.

Others have argued that tying aid to donor-country products is common sense; it is a strategic use of aid to promote donor country's business or exports. It is further argued that tied aid - if well designed and effectively managed - would not necessarily compromise the quality as well as the effectiveness of aid.<ref>Aryeetey, 1995; Sowa 1997.</ref> However, this argument would hold particularly for programme aid, where aid is tied to a specific projects or policies and where there is little or no commercial interest. It must be emphasized, however, that commercial interest and aid effectiveness are two different things, and it would be difficult to pursue commercial interest without compromising aid effectiveness. Thus, the idea of maximizing development should be separated from the notion of pursuing commercial interest. Tied aid improves donors export performance, creates business for local companies and jobs. It also helps to expose firms, which have not had any international experience on the global market to do so.<ref name="tiedaid">[https://archive.today/20130105111331/http://www3.interscience.wiley.com/journal/112138351/abstract?CRETRY=1&SRETRY=0 Tied Aid and Multi-Donor Budgetary Support], ''Journal of International Development'', Vol 17. Issue 8</ref>

==== Fungibility of aid ====

Aid fungibility refers to the fact that upon receiving [[Development aid|international aid]], and therefore have more [[Fiscal policy|fiscal flexibility]], recipient countries and their governments may divert their resources to other expenses. Especially, when projects financed by international aid achieve some goals that the government would have needed to achieve on its own, absent of aid, the local resources that were saved can be used for other purposes.<ref name="WorldBank1998">World Bank. (1998). The implications of foreign aid fungibility for development assistance (Policy Research Working Paper WPS 2022). [http://documents.worldbank.org/curated/en/660401468766542269/The-implications-of-foreign-aid-fungibility-for-development-assistance World Bank]</ref> It is a factor in the discussion about aid effectiveness and the effects of aid fungibility on development are debated.

===== Concept and Mechanisms =====  

Foreign aid can be categorized as either '''earmarked aid''' (allocated for a specific project or sector) or '''general budget support''' (provided with fewer restrictions). When aid is fungible, recipient governments may reduce their own spending in areas where donors provide assistance and reallocate those funds to other priorities, which may not align with donors' initial intentions.<ref name="Pack1993">Pack, H., & Pack, J. R. (1993). Foreign aid and the question of fungibility. ''The Review of Economics and Statistics'', 75(2), 258–265. [https://doi.org/10.2307/2109431 doi:10.2307/2109431]</ref><ref name="Feyzioglu1998">Feyzioglu, T., Swaroop, V., & Zhu, M. (1998). A panel data analysis of the fungibility of foreign aid. ''The World Bank Economic Review'', 12(1), 29–58.</ref> In the case of earmarked aid, the goal is often to limit fungibility by specifying how funds should be spent (infrastructure, health, education), though difficult to enforce. Using general budget support provides governments with more flexibility, enabling recipient them to allocate funds according to their own priorities, thereby increasing the likelihood of fungibility.  

In practice, aid fungibility can occur through several mechanisms:  

* '''Sectoral substitution''': Governments may decrease domestic spending in sectors where they receive foreign aid and reallocate funds elsewhere, whether it is for military spending or debt repayment. In the education and health sector, it appears that technical cooperation reduces fungibility.<ref name="Sijpe2013">Van de Sijpe, N. (2013). Is foreign aid fungible? Evidence from the education and health sectors. ''The World Bank Economic Review'', 27(2), 320–356. [http://www.jstor.org/stable/43774110 JSTOR]</ref>  
* '''Geographical reallocation''': Aid targeted at specific regions may allow governments to divert resources to other areas. An example is the Case Study on Chinese aid in Africa.<ref name="Dreher2019">Dreher, A., Fuchs, A., Hodler, R., Parks, B. C., Raschky, P. A., & Tierney, M. J. (2019). African leaders and the geography of China’s foreign assistance. ''Journal of Development Economics'', 140, 44–71. [https://doi.org/10.1016/j.jdeveco.2019.05.001 doi:10.1016/j.jdeveco.2019.05.001]</ref>

* '''Macroeconomic adjustments''': Aid may affect overall government fiscal policies, including tax collection and borrowing strategies.<ref name="Jones2005">Jones, K. (2005). Moving money: Aid fungibility in Africa. ''The SAIS Review of International Affairs'', 25(2), 167–180. [https://www.jstor.org/stable/26999284 JSTOR]</ref> 

===== Implications for Development =====  

The effects of aid fungibility on development outcomes are debated. Some studies suggest that fungibility reduces aid effectiveness by weakening donor control over expenditures, potentially allowing funds to be used for purposes unrelated to development.<ref name="WorldBank1998" /> Others argue that fungibility can have positive effects if governments reallocate the resources to areas with greater needs, or if it enhances overall [[Welfare spending|welfare]].<ref name="Rana2020">Rana, Z., & Koch, D.-J. (2020). Why fungibility of development aid can be good news: Pakistan case study. ''World Development Perspectives'', 20, 100248. [https://doi.org/10.1016/j.wdp.2020.100248 doi:10.1016/j.wdp.2020.100248]</ref><ref name="Rana2022">Rana, Z., & Koch, D.-J. (2022). Can fungibility of development aid lead to more effective achievement of the SDGs? An analysis of the aggregate welfare effect of aid fungibility (WIDER Working Paper 122/2022). UNU-WIDER. [https://doi.org/10.35188/UNU-WIDER/2022/255-3 doi:10.35188/UNU-WIDER/2022/255-3]</ref>  

Aid fungibility can also impact governance and accountability. When governments have more discretion over aid funds, it may lead to more efficient spending or, conversely, increased opportunities for misallocation.<ref name="Seim2020">Seim, B., Jablonski, R., & Ahlbäck, J. (2020). How information about foreign aid affects public spending decisions: Evidence from a field experiment in Malawi. ''Journal of Development Economics'', 146, 102522. [https://doi.org/10.1016/j.jdeveco.2020.102522 doi:10.1016/j.jdeveco.2020.102522]</ref>

Aid projects can also be in competition with government projects. If successful, they can become substitutes for government performance. In that case, voters' [[accountability]] towards their leaders is flawed, as the governments becomes popular due to the success of projects it is not responsible for, while taking credit for the work done by NGOs.<ref>{{cite book |last1=Birdsall |first1=Nancy |title=Deadly Sins: Reflections on Donor Failings |date=2006 |publisher=Routledge |isbn=9781315128252 |pages=16 |url=https://doi.org/10.4324/9781315128252}}</ref> This relates to literature about [[Dependency theory|aid dependency]], as aid can become a substitute and disincentivize state capacity of the government. Higher dependence on aid lowers state capacity and ultimately distorts the link between the government and its citizens.

===== Case Studies =====  

Empirical research has provided mixed evidence on the extent and consequences of aid fungibility:  

* A study on '''China’s foreign aid to Africa''' found that aid projects were often located in politically strategic areas, suggesting that recipient governments influence aid allocation.<ref name="Dreher2019" /> Indeed, aid provided by China is found to be redirected to local leaders' ethnic homeland, as compared to other regions. On the other hand, this effect is not present with development projects financed by the World Bank.
* Research in '''Pakistan''' suggested that aid fungibility might contribute to better overall resource allocation, improving social outcomes.<ref name="Rana2020" /> In this study, it is shown that there is a "U-shaped" relationship between aid received by the government and its expenditures on development projects. That is, when receiving a low amount of aid, the government will invest more in development projects with its resources. When the amount of aid received increases, the incentive to spend on development projects decreases.
* Studies on '''Rwanda'''<ref name="Rana2022-2" /> and '''Malawi'''<ref name="Seim2020" /> examined how recipient governments’ control over aid influences public spending, with varied effects on efficiency and transparency.<ref name="Rana2022" /> The experiment in Malawi showed that politicians receiving information about existing development projects in local schools were less likely to send development money to those schools and target other needy but not-yet-targeted areas. The study in Rwanda investigates aid fungibility when countries take ownership of their development programs. Akin to the Pakistan study,<ref name="Rana2020" /> a "U-shaped" relationship between aid received and government expenditures on development. While the government was able to shift aid to projects that were in its priorities, increasing aid effectiveness, concerns were raised about certain sectors being left aside, and the need for control from institutions.<ref name="Rana2022-2">Rana, Z. A., & Koch, D.-J. (2022, September). What happens to aid fungibility when the recipient government takes control? effects of aid ownership in rwanda. Development Policy Review , 40 (5). Retrieved
from https://doi.org/10.1111/dpr.12604 doi: 10.1111/dpr.12604</ref>

==Ways to improve aid effectiveness==

=== Conditionalities ===
{{Main|Conditionality}}

{{See also|Tied aid}}

A major proportion of aid from donor nations is [[Tied aid|tied]], mandating that a receiving nation spend on products and expertise originating only from the donor country. <ref name="tiedaid2">{{cite web |title=Tied aid strangling nations, says UN |url=http://ipsnews.net/interna.asp?idnews=24509 |url-status=dead |archive-url=https://web.archive.org/web/20101223203509/http://www.ipsnews.net/interna.asp?idnews=24509 |archive-date=23 December 2010 |access-date=27 May 2011 |publisher=ispnews.net}}</ref> [[Eritrea]] discovered that it would be cheaper to build its network of railways with local expertise and resources rather than to spend aid money on foreign consultants and engineers.<ref name="tiedaid2" /> [[United States|US]] law, backed by strong farm interests,<ref>{{cite news |date=27 April 2013 |title=Aid policy: Helping whom exactly? |url=https://www.economist.com/news/united-states/21576697-administration-proposes-overdue-reforms-americas-overseas-food-aid-helping-whom |access-date=5 May 2013 |work=economist}}</ref> requires [[food aid]] be spent on buying food from the US rather than locally, and, as a result, half of what is spent is used on [[transport]].<ref>{{cite web |date=20 September 2008 |title=Let them eat micronutrients |url=http://www.newsweek.com/id/160075 |access-date=27 May 2011 |publisher=newsweek.com}}</ref> As a result, tying aid is estimated to increase the cost of aid by 15–30%.<ref name="Economist">{{cite news |date=6 September 2008 |title=The future of aid |url=http://www.economist.com/world/international/displaystory.cfm?story_id=12060397 |access-date=27 March 2013 |work=economist}}</ref> [[Oxfam America]] and [[American Jewish World Service]] report that reforming US food aid programs could extend food aid to an additional 17.1 million people around the world.<ref>{{cite web |title=Food aid reform |url=http://www.oxfamamerica.org/campaigns/food-justice/food-aid |publisher=Oxfam America}}</ref>

The [[World Bank]] and the [[International Monetary Fund]], as primary holders of developing countries' debt, attach [[structural adjustment]] [[Conditionality|conditionalities]] to loans which generally include the elimination of state subsidies and the [[privatization]] of [[state services]]. For example, the [[World Bank]] presses poor nations to eliminate subsidies for [[fertilizer]] even while many farmers cannot afford them at market prices.<ref name="Malawi">{{cite news |last=Dugger |first=Celia W. |date=2 December 2007 |title=Ending famine simply by ignoring the experts |url=https://www.nytimes.com/2007/12/02/world/africa/02malawi.html |url-status=live |archive-url=https://web.archive.org/web/20110511212026/http://www.nytimes.com/2007/12/02/world/africa/02malawi.html |archive-date=11 May 2011 |access-date=27 May 2011 |newspaper=nytimes.com}}</ref> In the case of [[Malawi]], almost five million of its 13 million people used to need emergency food aid. However, after the government changed policy and subsidies for fertilizer and seed were introduced, farmers produced record-breaking corn harvests in 2006 and 2007 as production leaped to 3.4 million in 2007 from 1.2 million in 2005, making Malawi a major food exporter.<ref name="Malawi" /> In the former [[Soviet Union|Soviet]] states, the reconfiguration of public financing in their [[Transition economy|transition to a market economy]] called for reduced spending on health and education, sharply increasing poverty.<ref name="Soviet">{{cite news |date=12 October 2000 |title=Study Finds Poverty Deepening in Former Communist Countries |url=https://query.nytimes.com/gst/fullpage.html?res=9C07E0D8163FF931A25753C1A9669C8B63 |access-date=28 May 2011 |newspaper=nytimes.com}}</ref><ref>''Transition: The First Ten Years – Analysis and Lessons for Eastern Europe and the Former Soviet Union'', The World Bank, Washington, DC, 2002, p. 4.</ref><ref>{{cite news |date=11 October 2000 |title=Child poverty soars in eastern Europe |url=http://news.bbc.co.uk/1/hi/business/966616.stm |url-status=live |archive-url=https://web.archive.org/web/20110512034826/http://news.bbc.co.uk/1/hi/business/966616.stm |archive-date=12 May 2011 |access-date=27 May 2011 |work=BBC News}}</ref>

In their April 2002 publication, Oxfam Report reveals that aid tied to trade liberalization by the donor countries such as the European Union with the aim of achieving economic objective is becoming detrimental to developing countries.<ref>{{Cite web |date=April 2002 |title=Oxfam - Trade - Europe's Double Standards |url=http://www.oxfam.org.uk/what_we_do/issues/trade/bp22_eutrade.htm |url-status=dead |archive-url=https://web.archive.org/web/20031003013638/http://www.oxfam.org.uk/what_we_do/issues/trade/bp22_eutrade.htm |archive-date=3 October 2003 |access-date=28 May 2018}}</ref> For example, the EU subsidizes its agricultural sectors in the expense of Latin America who must liberalize trade in order to qualify for aid. Latin America, a region with a comparative advantage on agriculture and a great reliance on its agricultural export sector, loses $4 billion annually due to EU farming subsidy policies. Carlos Santiso advocates a "radical approach in which donors cede control to the recipient country".<ref>{{Cite journal |last=Santiso |first=Carlos |date=Fall 2001 |title=Good Governance and Aid Effectiveness: The World Bank and Conditionality |url=https://www.researchgate.net/publication/228959367 |journal=The Georgetown Public Policy Review |volume=7 |issue=1 |pages=1–22}}</ref>

=== Cash aid versus in-kind aid ===
A report by a High Level Panel on Humanitarian Cash Transfers found that only 6% of aid is delivered in the form of cash or vouchers.<ref name="cashpanel">{{cite web |date=9 February 2016 |title=Doing cash differently: how cash transfers can transform humanitarian aid |url=https://www.odi.org/publications/9876-cash-transfers-humanitarian-vouchers-aid-emergencies |website=ODI}}</ref> But there is a growing realization among aid groups that, for locally available goods, giving [[Cash and Voucher Assistance|cash or cash vouchers]] instead of imported goods is a cheaper, faster, and more efficient way to deliver aid.<ref name="csmonitor">{{cite journal |date=4 June 2008 |title=UN aid debate: Give cash, not food? |url=http://www.csmonitor.com/2008/0604/p01s02-woaf.html |journal=Christian Science Monitor}}</ref>

Evidence shows that cash can be more transparent, more accountable, more cost effective, help support local markets and economies, and increase financial inclusion and give people more dignity and choice.<ref name="cashpanel" /> Sending cash is cheaper as it does not have the same transaction costs as shipping goods. Sending cash is also faster than shipping the goods. In 2009 for sub-Saharan Africa, food bought locally by the WFP cost 34 percent less and arrived 100 days faster than food sent from the United States, where buying food from the United States is required by law.<ref name="fixes">{{cite news |last=Rosenberg |first=Tina |date=24 April 2013 |title=When food isn't the answer to hunger |url=http://opinionator.blogs.nytimes.com/2013/04/24/when-food-isnt-the-answer-to-hunger/ |access-date=5 May 2013 |newspaper=nytimes.com}}</ref> Cash aid also helps local food producers, usually the poorest in their countries, while imported food may damage their livelihoods and risk continuing hunger in the future.<ref name="fixes" /> [[Unconditional cash transfer|Unconditional cash transfers]], for example, appear to be an effective intervention for reducing extreme poverty, while at the same time also improving health and education outcomes.<ref name="doi10.1002/14651858.CD011135.pub2">{{cite journal |last1=Pega |first1=Frank |last2=Liu |first2=Sze |last3=Walter |first3=Stefan |last4=Pabayo |first4=Roman |last5=Saith |first5=Ruhi |last6=Lhachimi |first6=Stefan |year=2017 |title=Unconditional cash transfers for reducing poverty and vulnerabilities: effect on use of health services and health outcomes in low- and middle-income countries |journal=Cochrane Database of Systematic Reviews |volume=11 |issue=4 |pages=CD011135 |doi=10.1002/14651858.CD011135.pub2 |pmc=6486161 |pmid=29139110}}</ref><ref name="doi10.1002/14651858.CD011135.pub3">{{cite journal |last1=Pega |first1=Frank |last2=Pabayo |first2=Roman |last3=Benny |first3=Claire |last4=Lee |first4=Eun-Young |last5=Lhachimi |first5=Stefan |last6=Liu |first6=Sze |year=2022 |title=Unconditional cash transfers for reducing poverty and vulnerabilities: effect on use of health services and health outcomes in low- and middle-income countries |journal=Cochrane Database of Systematic Reviews |volume=2022 |issue=3 |pages=CD011135 |doi=10.1002/14651858.CD011135.pub3 |pmc=8962215 |pmid=35348196}}</ref>

The [[World Food Program]] (WFP), the biggest non-governmental distributor of food, announced that it will begin distributing cash and vouchers instead of food in some areas, which [[Josette Sheeran]], the WFP's executive director, described as a "revolution" in food aid.<ref name="csmonitor" /><ref name="wfp">{{cite web |date=12 August 2008 |title=Cash roll-out to help hunger hot spots |url=http://www.wfp.org/english/?ModuleID=137&Key=2899 |url-status=dead |archive-url=https://web.archive.org/web/20090212124012/http://www.wfp.org/english/?ModuleID=137&Key=2899 |archive-date=12 February 2009 |access-date=5 May 2013 |website=World Food Programme}}</ref>

=== Coordination ===
While the number of Non-governmental Organization have increased dramatically over the past few decades, fragmentation in aid policy is an issue.<ref name="Economist" /> Because of such fragmentation, health workers in several African countries, for example, say they are so busy meeting western delegates that they can only do their proper jobs in the evening.<ref name="Economist" />

One of the Paris Declaration's priorities is to reduce systems of aid that are "parallel" to local systems.<ref name="Economist" /> For example, [[Oxfam]] reported that, in Mozambique, donors are spending $350 million a year on 3,500 technical consultants, which is enough to hire 400,000 local civil servants, weakening local capacity.<ref name="Economist" /> Between 2005 and 2007, the number of parallel systems did fall, by about 10% in 33 countries.<ref name="Economist" /> In order to improve coordination and reduce parallel systems, the Paris Declaration suggests that aid recipient countries lay down a set of national development priorities and that aid donors fit in with those plans.<ref name="Economist" />

=== Aid priorities ===
Laurie Garret, author of the article "The Challenge of Global Health" points out that the current aid and resources are being targeted at very specific, high-profile diseases, rather than at general [[public health]].  Aid is "stovepiped" towards narrow, short-term goals relating to particular programs or diseases such as increasing the number of people receiving anti-retroviral treatment, and increasing distribution of bed nets. These are band aid solutions to larger problems, as it takes healthcare systems and infrastructure to create significant change.  Donors lack the understanding that effort should be focused on broader measures that affect general well-being of the population, and substantial change will take generations to achieve. Aid often does not provide maximum benefit to the recipient, and reflects the interests of the donor.<ref name="Garrett">{{cite journal |last=Garrett |first=Laurie |title=The Challenge of Global Health |journal=Foreign Affairs |volume=86 |issue=1}}</ref>

Furthermore, consider the breakdown, where aid goes and for what purposes.  In 2002, total gross foreign aid to all developing countries was $76 billion.  Dollars that do not contribute to a country's ability to support basic needs interventions are subtracted.  Subtract $6 billion for debt relief grants. Subtract $11 billion, which is the amount developing countries paid to developed nations in that year in the form of loan repayments.  Next, subtract the aid given to middle income countries, $16 billion.  The remainder, $43 billion, is the amount that developing countries received in 2002.  But only $12 billion went to low-income countries in a form that could be deemed budget support for basic needs.<ref name="Sachs">Sachs, Jeffrey D. 2005. The End of Poverty: Economic Possibilities for Our Time. New York: Penguin Books.</ref> When aid is given to the [[Least Developed Countries]] who have good governments and strategic plans for the aid, it is thought that it is more effective.<ref name="Sachs" />

=== Logistics ===
[[Humanitarian aid]] is argued to often not reach those who are intended to receive it. For example, a report composed by the World Bank in 2006 stated that an estimated half of the funds donated towards health programs in sub-Saharan Africa did not reach the clinics and hospitals. Money is paid out to fake accounts, prices are increased for transport or warehousing, and drugs are sold to the black market. Another example is in Ghana, where approximately 80% of donations do not go towards their intended purposes. This type of corruption only adds to the criticism of aid, as it is not helping those who need it, and may be adding to the problem.<ref name="Garrett" /> Only about one fifth of U.S. aid goes to countries classified by the OECD as 'least developed.'<ref name="Singer">Singer, Peter. 2009. [[The Life You Can Save]]. New York:Random House.</ref> This "pro-rich" trend is not unique to the United States.<ref name="Sachs" /><ref name="Singer" /> According to Collier, "the middle income countries get aid because they are of much more commercial and political interest than the tiny markets and powerlessness of the bottom billion."<ref name="Collier">{{Cite book |last=Collier |first=Paul |url=https://archive.org/details/bottombillionwhy00coll_0 |title=The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It |date=25 May 2007 |publisher=Oxford University Press |isbn=9780199740949 |language=en |url-access=registration}}</ref> What this means is that, at the most basic level, aid is not targeting the most extreme poverty.<ref name="Sachs" /><ref name="Singer" />

The logistics in which the delivery of humanitarian occurs can be problematic. For example, an earthquake in 2003 in [[Bam, Iran]] left tens of thousands of people in need of disaster zone aid. Although aid was flown in rapidly, regional belief systems, cultural backgrounds and even language seemed to have been omitted as a source of concern. Items such as religiously prohibited pork, and non-generic forms of medicine that lacked multilingual instructions came flooding in as relief. An implementation of aid can easily be problematic, causing more problems than it solves.<ref>{{Cite journal |last1=Habibzadeh |first1=Farrokh |last2=Yadollahie |first2=Mahboobeh |last3=Kucheki |first3=Maryam |date=August 2008 |title=International aid in disaster zones: help or headache? |journal=The Lancet |volume=372 |issue=9636 |pages=374 |doi=10.1016/s0140-6736(08)61157-5 |issn=0140-6736 |pmid=18675688 |s2cid=50115 |doi-access=free}}</ref>

Considering transparency, the amount of aid that is recorded accurately has risen from 42% in 2005 to 48% in 2007.<ref name="Economist" />

=== Improving the economic efficiency of aid ===
Currently, donor institutions make proposals for aid packages to recipient countries.  The recipient countries then make a plan for how to use the aid based on how much money has been given to them.  Alternatively, [[Non-governmental organizations|NGO]]'s receive funding from private sources or the government and then implement plans to address their specific issues. According to Sachs, in the view of some scholars, this system is inherently ineffective.<ref name="Sachs" />

According to Sachs, we should redefine how we think of aid.  The first step should be to learn what developing countries hope to accomplish and how much money they need to accomplish those goals.  Goals should be made with the [[Millennium Development Goals]] in mind for these furnish real metrics for providing basic needs.  The "actual transfer of funds must be based on rigorous, country-specific plans that are developed through open and consultative processes, backed by [[good governance]] in the recipient countries, as well as careful planning and evaluation."<ref name="Sachs" />

Possibilities are also emerging as some developing countries are experiencing rapid economic growth, they are able to provide their own expertise gained from their recent transition. This knowledge transfer can be seen in donors, such as Brazil, whose $1 billion in aid outstrips that of many traditional donors.<ref name="ODI1">{{Cite web |author1=Lidia Cabral |author2=Julia Weinstock |date=October 2010 |title=Brazil: an emerging aid player |url=https://www.odi.org/publications/5120-brazil-emerging-aid-player |access-date=28 May 2018 |website=ODI |language=en}}</ref> Brazil provides most of its aid in the form of technical expertise and knowledge transfers.<ref name="ODI1" /> This has been described by some observers as a 'global model in waiting'.<ref>{{Cite news |last=Cabral |first=Lidia |date=21 July 2010 |title=Brazil's development cooperation with the South: a global model in waiting |url=https://www.odi.org/comment/4952-brazils-development-cooperation-south-global-model-waiting |access-date=28 May 2018 |work=ODI |language=en}}</ref>

=== Using the private sector ===
According to [[Laurie Garrett]], for health aid to be maximized efficiently and most optimally, donations need to be directed to areas such as local industries, franchises, or profit centers in developing countries. By doing so, these actions can sustain health related spending and result in growth in the long run.<ref>Garrett, Laurie. 2007. The Challenge of Global Health. ''Foreign Affairs'' 86 (1):14-38]</ref>

Paul Collier, in ''The Bottom Billion'', suggests a model he calls “Independent Service Authorities”. These are organizations, independent from the government, that co-opt civil society to manage aid and public money and incorporate the scrutiny of public opinion and NGOs to determine how to maximize output from the expenditure of this money.<ref>{{cite book|last=Collier|first=Paul|title=The Bottom Billion: Why the Poorest Countries Are failing and What Can Be Done about It.|publisher=Oxford|year=2007}}</ref>

=== Sensitivity to recipient country institutions ===
Since the effectiveness of aid usually depends on the good-functioning of institutions in the recipient country, and since potential recipients are very varied in this respect, Charles Kenny (2006) argues that aid strategies must be tailored to the state of institutions in each case. Where institutions are strong, it is appropriate to provide programmatic aid. Where they are weak, there may be a role for aid in analysis, consensus-building and technical assistance to improve them, and meanwhile other "insulated" projects might go ahead if they do not harm the prospects for developing sound governmental institutions.<ref>{{cite report|url=https://openknowledge.worldbank.org/bitstream/handle/10986/9296/wps4005.pdf|title=What is effective aid? How would donors allocate it?|last1=Kenny|first1=Charles|date=September 2006|publisher=World Bank|access-date=2021-03-05}}</ref>

=== Best practices according to the High Level Forums on Aid Effectiveness ===
The Paris Declaration and other results of the [[High level forums on aid effectiveness|High Level Forums on Aid Effectiveness (2003-2011)]] embodied a broad consensus on what needed to be done to produce better development results.<ref>{{Cite web|url=http://www.oecd.org/dac/effectiveness/|title=Effective development co-operation - OECD|website=www.oecd.org|access-date=2019-07-04}}</ref> Its principles lay open the possible ways to undertake, which can be interpreted also as the major objectives of good aid: fostering recipient countries' ownership of development policies and strategies, maximizing donors' coordination and harmonization, improving aid transparency and mutual accountability of donors and recipients, just to name a few.<ref>See OECD, "The Paris Declaration on Aid Effectiveness". March 2, 2005.</ref>

The forums were supported by work done by the OECD, which had explored—through peer reviews and other work by the Development Assistance Committee (DAC)—the reasons why aid has and has not worked. This has resulted in a body of best practices and principles that can be applied globally to make aid work better.

====Improving aid transparency and mutual accountability of donors and recipients====
Some believe that the way to improvement is through better monitoring and evaluation, increased transparency, accountability and learning. For instance, Stefan Schmitz, a former senior aid official in the German government and the OECD, has argued that reporting duties, results-orientated action and ongoing performance assessments are essential for the sake of aid effectiveness, but political will must be already there for this to happen.<ref>{{Cite web|title=Comprehensive thinking|url=http://www.inwent.org/ez/articles/167079/index.en.shtml|url-status=dead|archive-url=https://web.archive.org/web/20100706045452/http://www.inwent.org/ez/articles/167079/index.en.shtml|archive-date=2010-07-06|access-date=2010-03-11}}</ref>

The Accra Agenda for Action states that transparency and accountability are essential elements for development results, as well as drivers of progress.<ref>OECD, "The Accra Agenda For Action", 3rd High Level Forum on Aid Effectiveness, September 4, 2008.</ref> Mutual accountability and transparency is one of the five partnership commitments of the Paris Declaration.<ref>OECD, "The Paris Declaration on Aid Effectiveness". March 2, 2005.</ref> Through 'transparency', donors and recipients can be held accountable for what they spend and aid can be made more effective by knowing the three Ws of transparency:
* Who gives money to which recipient?
* What project is being funded and for what purpose? and
* Where?<ref>Kharas, H., "Transparency: Changing the Accountability Engagement, and Effectiveness of Aid", in: Kharas, H., Makino, K., Jung, W., "Catalyzing Development", Brookings Institution Press, Washington, D.C. 2011.</ref>

Transparency offers a valuable answer to insecurity, making aid "predictable" and "reliable". Transparency has been shown to improve service delivery and to reduce opportunities for diversion and therefore corruption.<ref>Bjorkman, M., Svensson, J., "Power to the People: Evidence from a Randomized Field Experience on Community-Based Monitoring in Uganda", ''Quarterly Journal of Economics'' 124, no. 2: 735-69, 2009.</ref>

Transparency can be defined as a basic expression of mutual accountability.<ref>Mary Robinson’s definition, in the OECD Survey on Monitoring The Paris Declaration, 2008.</ref> Mutual accountability can only work if there is a global culture of transparency that demands provision of information through a set of rules and behavioral norms, which are difficult to enforce in the case of official development cooperation. In particular for emerging economy donors and private development assistance, these norms are only at a nascent stage. Kharas<ref>See Kharas, H., "Transparency: Changing the Accountability Engagement, and Effectiveness of Aid", in: Kharas, H., Makino, K., Jung, W., "Catalyzing Development", Brookings Institution Press, Washington, D.C. 2011.</ref> suggest to adopt the "regulation through information" approach,<ref>Majone, G. "The new European Agencies: regulation by information", ''Journal of European Public Policy'' 4, no. 2: 262-75, 1997.</ref> which has been developed and has proven its effectiveness in the case of the European integration. In fact, at the international level, when the enforcement of mandatory rules is difficult, the solution could be to provide and make available transparent, relevant, accurate and reliable information, which can be used to reward or sanction individual aid agencies according to their performances. This means establishing a strong culture of accountability within aid, which rewards aid successes but penalizes failures.

To achieve this, literature on the topic<ref>See, for example, Pranay, S., and Hubbard, M., "A Future for Aid Data: Research towards a South-South Cooperation Data Categorization to complement on-going IATI Categorizations’", ongoing research, DFID Future of Aid and Beyond Research Competition 2010-11, 2011.</ref> suggest that donors should agree on adopting a standardized format for providing information on volume, allocation and results, such as the [[International Aid Transparency Initiative]] (IATI), or other similar standards, and commit to improve recipient countries' databases with technical, financial and informational support. The format should be easily downloadable and with sufficient disaggregation to enable comparison with other data. Making aid data public and comparable among donors, would be likely to encourage a process of positive emulation towards a better usage of public funds.  After all, [[official development assistance]] (ODA) is a voluntary transfer that depends on the support of donor country taxpayers. Donors should therefore consider improving the transparency and traceability of aid funds also as a way of increasing engagement and support toward aid inside their own country. Moreover, a generalized adoption of IATI would ensure the publication of aid information in a timely way, the compatibility with developing countries' budgets and the reliability of future projections, which would have a strong and positive effect on the predictability of aid.<ref>Kharas, H., Makino, K., Jung, W., "Catalyzing Development", Brookings Institution Press, Washington, D.C. 2011.</ref>

Finally, to improve accountability while building evaluation capabilities in aid recipient countries and systematically collecting beneficiaries’ feedback, different mechanisms to evaluate and monitor transparency should be considered, such as independent third-party reviews, peer reviews or mutual reviews.<ref>See Droop, J., Isenman, P., and Mlalazi, B., "Mutual accountability in Aid Effectiveness: International-Level Mechanisms", Briefing Note, n.3, Oxford Policy Management, 2008.</ref>

==See also==
*[[Aid for Trade]]
*[[Development Assistance Committee]]
*[[Development Assistance Database]]
*[[Eurodad]]
*[[G8+5]]
*[[Humanitarian Response Index]]
*[[International Aid Transparency Initiative]]
*[[International Health Partnership]]
*[[Monterrey Consensus]]

==References==
{{Reflist}}

==External links==
*[http://www.cgdev.org/section/topics/aid_effectiveness Center for Global Development: Aid Effectiveness]
*[http://www.internationalhealthpartnership.net/en/ The International Health Partnership (IHP+)] A group of partners committed to putting international principles for effective aid and development cooperation into practice in the health sector
* [https://web.archive.org/web/20050728144653/http://www.aidharmonisation.org/ Aidharmonisation.org]
* [http://www.aideffectiveness.org/ Aideffectiveness.org]
* [http://www.euforic.org/detail_page.phtml?&page=resource_briefing_evaluat Euforic] {{Webarchive|url=https://web.archive.org/web/20070928032655/http://www.euforic.org/detail_page.phtml?&page=resource_briefing_evaluat |date=2007-09-28 }} pages on aid evaluation and effectiveness
* [http://www.oecd.org/document/18/0,3343,en_2649_3236398_35401554_1_1_1_1,00.html The OECD DAC's site on the Paris Declaration on Aid Effectiveness]

{{Effective altruism}}
{{Humanitarian aid}}

{{DEFAULTSORT:Aid Effectiveness}}
[[Category:International development]]
[[Category:International development in Africa]]
[[Category:Aid]]