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Why aid is unpredictable: An empirical analysis of the gap between actual and planned aid flows

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  • Canavire-Bacarreza, Gustavo Javier
  • Neumayer, Eric
  • Nunnenkamp, Peter

Abstract

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 have '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 highly significant and substantively important. In contrast, fragmented donor-recipient relationships have no effect on the shortfall of actual aid compared to donors' spending plans.

Suggested Citation

  • Canavire-Bacarreza, Gustavo Javier & Neumayer, Eric & Nunnenkamp, Peter, 2014. "Why aid is unpredictable: An empirical analysis of the gap between actual and planned aid flows," Kiel Working Papers 1933, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1933
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    References listed on IDEAS

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    11. Oya Celasun & Jan Walliser, 2008. "Predictability of aid: Do fickle donors undermine aid effectiveness? [‘The colonial origins of comparative development: An empirical investigation’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 23(55), pages 546-594.
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    Cited by:

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    2. Tobias Heinrich & Yoshiharu Kobayashi, 2022. "Evaluating explanations for poverty selectivity in foreign aid," Kyklos, Wiley Blackwell, vol. 75(1), pages 30-47, February.
    3. Alessandro De Matteis, 2018. "Follow the leader! The peer effect in aid supply decisions," Development Policy Review, Overseas Development Institute, vol. 36(6), pages 631-648, October.
    4. M. Rodwan Abouharb & David Cingranelli & Mikhail Filippov, 2019. "Too Many Cooks: Multiple International Principals Can Spoil the Quality of Governance," Social Sciences, MDPI, vol. 8(5), pages 1-22, May.
    5. Fløgstad, Cathrin & Hagen, Rune Jansen, 2017. "Aid Dispersion: Measurement in Principle and Practice," World Development, Elsevier, vol. 97(C), pages 232-250.
    6. Bernhard Reinsberg & Centre for Business Research, 2018. "Blockchain Technology and the Governance of Foreign Aid," Working Papers wp505, Centre for Business Research, University of Cambridge.
    7. Sèna Kimm Gnangnon, 2024. "The quality of Aid for Trade flows and economic complexity," International Economics and Economic Policy, Springer, vol. 21(4), pages 705-747, October.
    8. Gnangnon, Sèna Kimm, 2023. "The Quality of Aid for Trade Flows and Economic Complexity," EconStor Preprints 271538, ZBW - Leibniz Information Centre for Economics.
    9. Cormier, Ben & Heinzel, Mirko & Reinsberg, Bernhard, 2024. "Informally governing international development: G7 coordination and orchestration in aid," LSE Research Online Documents on Economics 122594, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    aid predictability; donor fragmentation; forward spending plans;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid

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