IDEAS home Printed from https://ideas.repec.org/p/zbw/ifwkwp/1933.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/98410/1/789083655.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Barthel, Fabian & Neumayer, Eric & Nunnenkamp, Peter & Selaya, Pablo, 2014. "Competition for Export Markets and the Allocation of Foreign Aid: The Role of Spatial Dependence among Donor Countries," World Development, Elsevier, vol. 64(C), pages 350-365.
    2. Knack, Stephen & Rahman, Aminur, 2007. "Donor fragmentation and bureaucratic quality in aid recipients," Journal of Development Economics, Elsevier, vol. 83(1), pages 176-197, May.
    3. Robert Lensink & Oliver Morrissey, 2000. "Aid instability as a measure of uncertainty and the positive impact of aid on growth," Journal of Development Studies, Taylor & Francis Journals, vol. 36(3), pages 31-49.
    4. Axel Dreher & Matthew Gould & Matthew Rablen & James Vreeland, 2014. "The determinants of election to the United Nations Security Council," Public Choice, Springer, vol. 158(1), pages 51-83, January.
    5. Peter Nunnenkamp & Hannes Öhler & Rainer Thiele, 2013. "Donor coordination and specialization: did the Paris Declaration make a difference?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(3), pages 537-563, September.
    6. Vreeland,James Raymond & Dreher,Axel, 2014. "The Political Economy of the United Nations Security Council," Cambridge Books, Cambridge University Press, number 9780521518413, September.
    7. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    8. Jean‐Claude Berthélemy, 2006. "Bilateral Donors’ Interest vs. Recipients’ Development Motives in Aid Allocation: Do All Donors Behave the Same?," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 179-194, May.
    9. Arnab Acharya & Ana Teresa Fuzzo de Lima & Mick Moore, 2006. "Proliferation and fragmentation: Transactions costs and the value of aid," Journal of Development Studies, Taylor & Francis Journals, vol. 42(1), pages 1-21.
    10. Iñaki Aldasoro & Peter Nunnenkamp & Rainer Thiele, 2010. "Less aid proliferation and more donor coordination? The wide gap between words and deeds," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(7), pages 920-940.
    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.
    12. Bulír, Ales & Hamann, A. Javier, 2008. "Volatility of Development Aid: From the Frying Pan into the Fire?," World Development, Elsevier, vol. 36(10), pages 2048-2066, October.
    13. Hudson, John & Mosley, Paul, 2008. "Aid Volatility, Policy and Development," World Development, Elsevier, vol. 36(10), pages 2082-2102, October.
    14. Emmanuel Frot & Javier Santiso, 2011. "Herding in Aid Allocation," Kyklos, Wiley Blackwell, vol. 64(1), pages 54-74, February.
    15. Hong-Min Chun & Elijah N. Munyi & Heejin Lee, 2010. "South Korea as an emerging donor: Challenges and changes on its entering OECD|DAC," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(6), pages 788-802.
    16. Kodama, Masahiro, 2012. "Aid Unpredictability and Economic Growth," World Development, Elsevier, vol. 40(2), pages 266-272.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rune Jansen Hagen, 2018. "Losing concentration? Lessons from a Swedish aid policy reform," Development Policy Review, Overseas Development Institute, vol. 36(S2), pages 984-1003, September.
    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bickenbach, Frank & Mbelu, Asithandile & Nunnenkamp, Peter, 2019. "Is foreign aid concentrated increasingly on needy and deserving recipient countries? An analysis of Theil indices, 1995–2015," World Development, Elsevier, vol. 115(C), pages 1-16.
    2. Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4415-4523, Elsevier.
    3. Boateng, Elliot & Agbola, Frank W. & Mahmood, Amir, 2021. "Foreign aid volatility and economic growth in Sub-Saharan Africa: Does institutional quality matter?," Economic Modelling, Elsevier, vol. 96(C), pages 111-127.
    4. Andreas Fuchs & Peter Nunnenkamp & Hannes Öhler, 2015. "Why Donors of Foreign Aid Do Not Coordinate: The Role of Competition for Export Markets and Political Support," The World Economy, Wiley Blackwell, vol. 38(2), pages 255-285, February.
    5. Ronald B. Davies & Stephan Klasen, 2019. "Darlings and Orphans: Interactions across Donors in International Aid," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(1), pages 243-277, January.
    6. Ronald B. Davies & Stephan Klasen, 2013. "Of Donor Coordination, Free-Riding, Darlings, and Orphans: The dependence of bilateral aid on other bilateral giving," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 137, Courant Research Centre PEG.
    7. Yasemin Bal Gündüz & Masyita Crystallin, 2018. "Do IMF programs catalyze donor assistance to low-income countries?," The Review of International Organizations, Springer, vol. 13(3), pages 359-393, September.
    8. 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.
    9. Kimura, Hidemi & Mori, Yuko & Sawada, Yasuyuki, 2012. "Aid Proliferation and Economic Growth: A Cross-Country Analysis," World Development, Elsevier, vol. 40(1), pages 1-10.
    10. Liya Palagashvili & Claudia R. Williamson, 2021. "Grading foreign aid agencies: Best practices across traditional and emerging donors," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 654-676, May.
    11. Iliana Olivié & Aitor Pérez, 2016. "Why don’t donor countries coordinate their aid? A case study of European donors in Morocco," Progress in Development Studies, , vol. 16(1), pages 52-64, January.
    12. Angelika J. Budjan & Andreas Fuchs, 2021. "Democracy and Aid Donorship," American Economic Journal: Economic Policy, American Economic Association, vol. 13(4), pages 217-238, November.
    13. Minasyan, Anna & Nunnenkamp, Peter, 2015. "Donors' openness to immigration and the effectiveness of foreign aid," Kiel Working Papers 1983, Kiel Institute for the World Economy (IfW Kiel).
    14. Feeny, Simon & de Silva, Ashton, 2012. "Measuring absorptive capacity constraints to foreign aid," Economic Modelling, Elsevier, vol. 29(3), pages 725-733.
    15. Suzuki, Mao, 2020. "Profits before patients? Analyzing donors’ economic motives for foreign aid in the health sector," World Development, Elsevier, vol. 132(C).
    16. Gnangnon, Sèna Kimm, 2021. "Aid for trade unpredictability and trade-related government expenditure in recipient-countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 79(C), pages 107-125.
    17. Fløgstad, Cathrin & Hagen, Rune Jansen, 2017. "Aid Dispersion: Measurement in Principle and Practice," World Development, Elsevier, vol. 97(C), pages 232-250.
    18. Peter Nunnenkamp & Hannes Öhler & Rainer Thiele, 2013. "Donor coordination and specialization: did the Paris Declaration make a difference?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(3), pages 537-563, September.
    19. Rik Habraken & Lau Schulpen & Paul Hoebink, 2017. "Putting promises into practice: The New Aid Architecture in Uganda," Development Policy Review, Overseas Development Institute, vol. 35(6), pages 779-795, November.
    20. Anna Minasyan & Peter Nunnenkamp, 2016. "Remittances and the Effectiveness of Foreign Aid," Review of Development Economics, Wiley Blackwell, vol. 20(3), pages 681-701, August.

    More about this item

    Keywords

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

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ifwkwp:1933. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/iwkiede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.