Why are aid projects less effective in the Pacific?

Motivation The Pacific is the world’s most aid‐dependent region, yet available data suggest aid projects are less effective on average in the Pacific than elsewhere in the developing world. Purpose This article examines the most likely explanations for lower aid project effectiveness in the Pacific. Explanations include poor governance, restricted levels of political freedom, poor economic performance, isolation, and small populations. Methods and approach Three approaches to causal mediation analysis are used to identify which explanatory variables best explain why aid projects are less effective in the Pacific. Aid project effectiveness data come from a multi‐donor dataset of individual aid projects. Data on potential explanatory variables comes from a range of international datasets. Findings All three causal mediation approaches point to the isolation of many Pacific countries, alongside comparatively small populations, as being the main impediments to project effectiveness. These findings hold even with a suite of project traits being controlled for and within an analysis in which all the key country variables of interest are controlled for. Policy implications Project effectiveness in the Pacific appears to be primarily constrained by variables that cannot themselves be shifted (the region’s countries cannot readily be made less remote or more populous). Improved project effectiveness in the Pacific will require donor practice to carefully adapt to the region’s context. A structured process of donor learning will be needed.