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1. How Do Humanitarian Donors Make Decisions, and What Is the Scope for Change?

Author:
Rose Worden and Patrick Saez
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
n this policy paper we review donor responses to a survey and interviews to probe the effects of the broader political and economic context in which donors operate, and identify internal constraints on humanitarian funding, planning, and making allocative decisions. We identify and highlight perceived and real constraints with which donors contend when making decisions on how to allocate limited resources. The way humanitarian donors fund is key to system-wide efficiency, effectiveness, and reforms in the humanitarian system. Donors face competing priorities when engaging in humanitarian response. They care about retaining control, must rely on limited information sources to inform decisions, and balance their approaches with other foreign policy objectives. Institutional legacies, trust, and visibility for their efforts also matter to donors. These factors have shaped how donors have approach their current commitments to Grand Bargain reforms as donors prepare to engage with the newest iteration of reform—the Grand Bargain 2.0.
Topic:
Humanitarian Aid, Reform, Institutions, and Donors
Political Geography:
Global Focus

2. Rethinking Humanitarian Reform: What Will it Take to Truly Change the System?

Author:
Patrick Saez, Jeremy Konyndyk, and Rose Worden
Publication Date:
09-2021
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
This brief summarizes three years of research under the project, “Rethinking Humanitarian Reform,” led by Jeremy Konyndyk, Patrick Saez, and Rose Worden, and funded by the aid departments of the United Kingdom and Australia. The project aimed to understand the incentives behind the humanitarian system and shift them to better prioritize the needs of affected populations.
Topic:
Development, Humanitarian Aid, Reform, and Institutionalism
Political Geography:
United Kingdom, Europe, Australia, and Global Focus

3. Five Takeaways on the Future of Humanitarian Reform

Author:
Jeremy Konyndyk
Publication Date:
08-2019
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
The world’s humanitarian aid architecture is growing outdated. Relief programs are most effective when they are integrated, locally owned, and demand driven. But humanitarian action in the 21st century remains constrained by a 20th-century aid model: siloed, supply driven, and centered on the individual mandates and sectors of major international aid agencies. This makes aid both less effective and less responsive than it could be. In a world where displacement is at the highest levels in generations, climate disasters are increasing, and humanitarian funding is beginning to level off, this disconnect is no longer tenable. But fixing it is not a simple matter—multiple rounds of humanitarian reform over the past 15 years have made progress but fallen short of fundamental change. Earlier this summer in Geneva, CGD convened two high-level private roundtables, one with leaders from humanitarian donor institutions and another with senior executives from major humanitarian aid agencies (both multilaterals and NGOs), to discuss how to make humanitarian aid more cohesive and user-centered. The meetings were part of a multiyear research initiative exploring how modernizing the humanitarian business model and humanitarian governance are integral to improving field-level humanitarian impact. CGD teed up the conversation with three emerging ideas from our research (you can see the presentation slides here). These ideas—the subjects of several forthcoming papers CGD is developing —explore ways of better aligning aid delivery around enhanced impact toward affected people’s priorities
Topic:
Development, Humanitarian Aid, International Cooperation, Reform, and Humanitarian Intervention
Political Geography:
Global Focus

4. People-Driven Response: Power and Participation in Humanitarian Action

Author:
Jeremy Konyndyk and Rose Worden
Publication Date:
09-2019
Content Type:
Research Paper
Institution:
Center for Global Development
Abstract:
The notion that humanitarian response should center on the people it serves, rather than the aid agencies serving them, has been repeatedly codified in humanitarian commitments as far back as the early 1990s. Yet the mainstream humanitarian system has struggled to translate these commitments into practice: corresponding reform efforts have failed to systemically broaden accountability to and participation of aid recipients in response efforts. Major constraints have included misaligned incentive structures between donors and aid agencies, power imbalances between aid providers and aid recipients, and operational and political complexities arising at field level. To produce real systemic change, the aid system must move beyond technical and rhetorical approaches to accountability and begin reshaping the power and incentive structures that influence aid decision-making. This paper proposes a set of mutually reinforcing recommendations centered around three imperatives: enshrining the influence of aid recipients at all levels of aid decision-making; developing independent channels for soliciting the priorities and perspectives of crisis-affected people; and institutionalizing a set of enabling changes to humanitarian operational and personnel practices.
Topic:
Development, Humanitarian Aid, Institutionalism, and Humanitarian Crisis
Political Geography:
Global Focus

5. Payouts for Perils How Insurance Can Radically Improve Emergency Aid

Author:
Theodore Talbot, Stefan Dercon, and Owen Barder
Publication Date:
04-2017
Content Type:
Special Report
Institution:
Center for Global Development
Abstract:
Millions of people face hazards like cyclones and drought every day. International aid to deal with disasters after they strike is generous, but it is unpredictable and fragmented, and it often fails to arrive when it would do the most good. We must stop treating disasters like surprises. Matching finance to planning today will save lives, money, and time tomorrow.
Topic:
Humanitarian Aid, Foreign Aid, and International Development
Political Geography:
Global Focus

6. Philanthropy, Welfare Capitalism or Radically Different Global Economic Model: What Would It Take to End Global Poverty within a Generation Based on Historical Growth Patterns?

Author:
Peter Edward and Andy Sumner
Publication Date:
09-2015
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper considers the effectiveness and efficiency of global growth, as a route to poverty reduction, since 1990 and then demonstrates the redistributive challenges implicit in various poverty lines and scenarios: the significance being that this historical data can inform understanding and appreciation of what it would involve to end global poverty in the future. We find that a very modest redistribution of global growth could have ended poverty already at the lowest poverty lines. However, higher, but arguably more reasonable, poverty lines present radically different challenges to the current workings of national economic systems and to global (normative) obligations.
Topic:
Development, Economics, Humanitarian Aid, and Poverty

7. Social Capital and Disaster Recovery: Evidence from Sichuan Earthquake in 2008

Author:
Chun Wing Tse, Jianwen Wei, and Yihan Wang
Publication Date:
09-2013
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Social capital can help reduce adverse shocks by facilitating access to transfers and remittances.This study examines how various measures of social capital are associated with disaster recovery after the 2008 Sichuan earthquake. We find that households having a larger Spring Festival network in 2008 do better in housing reconstruction. A larger network significantly increases the amount of government aid received for housing reconstruction. Furthermore, households having larger networks receive monetary and material support from more people, which also explains the positive impacts on recovery from the earthquake. As for other measures of social capital, connections with government officials and communist party membership do not significantly contribute to disaster recovery. Human capital, measured by the years of schooling of household head, is not positively correlated with housing reconstruction.
Topic:
Economics, Humanitarian Aid, Natural Disasters, and Governance
Political Geography:
China and Israel

8. HIV/AIDS Intervention Packages in Five Countries: A Review of Budget Data

Author:
Amanda Glassman, Denizhan Duran, Rachel Silverman, and Victoria Fan
Publication Date:
10-2013
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
More than ever, global health funding agencies must get better value for money from their investment portfolios; to do so, each agency must know the interventions it supports and the sub-populations targeted by those interventions in each country.
Topic:
Foreign Policy, Development, Economics, Health, Humanitarian Aid, and Health Care Policy
Political Geography:
India, Philippines, Ethiopia, and Nigeria

9. Migration and Disaster-Induced Displacement: European Policy, Practice, and Perspective

Author:
Michael D. Cooper
Publication Date:
10-2012
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Over the last decade, a series of devastating natural disasters have killed hundreds of thousands of people, displaced millions, and decimated the built environment across wide regions, shocking the public imagination and garnering unprecedented financial support for humanitarian relief efforts. Some suggest that disaster migration must be supported by the international community, first as an adaption strategy in response to climate-change, and second, as a matter of international protection.
Topic:
Climate Change, Development, Environment, Humanitarian Aid, and Natural Disasters
Political Geography:
Europe

10. An Index of the Quality of Official Development Assistance in Health

Author:
Amanda Glassman and Denizhan Duran
Publication Date:
02-2012
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Health is one of the largest and most complex aid sectors: 16 percent of all aid went to the health sector in 2009. While many stress the importance of aid effectiveness, there are limited quantitative analyses of the quality of health aid. In this paper, we apply Birdsall and Kharas's Quality of Official Development Assistance (QuODA) methodology to rank donors across 23 indicators of aid effectiveness in health. We present our results, track progress from 2008 to 2009, compare health to overall aid, discuss our limitations, and call for more transparent and relevant aid data in the sector level as well as the need to focus on impact and results.
Topic:
Development, Health, Human Welfare, Humanitarian Aid, and Foreign Aid

11. The Quality of Official Development Assistance Assessment 2009: Is Aid Quality Improving?

Author:
Nancy Birdsall, Homi Kharas, and Rita Perakis
Publication Date:
04-2012
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This report presents the results of the second edition of the Quality of Official Development Assistance (QuODA) assessment, with a focus on the changes that have occurred in donor performance since the first edition. These results were released in summary form in November, 2011, just before the Fourth High Level Forum on Aid Effectiveness in Busan, South Korea.
Topic:
International Relations, Development, Economics, Humanitarian Aid, Poverty, and Foreign Aid
Political Geography:
South Korea

12. Haiti: Where Has All the Money Gone?

Author:
Vijaya Ramachandran and Julie Walz
Publication Date:
05-2012
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Since the 2010 earthquake, almost $6 billion has been disbursed in official aid to Haiti, a country with a population of just under 10 million. An estimated $3 billion has been donated to NGOs in private contributions in addition to official aid. The United States Government alone has disbursed almost $2 billion of this total amount and has pledged over $3 billion for relief and reconstruction.
Topic:
Corruption, Humanitarian Aid, Non-Governmental Organization, and Foreign Aid
Political Geography:
United States, Caribbean, and Haiti

13. Measuring the Quality of Aid: QuODA Second Edition

Author:
Nancy Birdsall, Homi Kharas, and Rita Perakis
Publication Date:
11-2011
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
As demonstrated by the Paris Declaration on Aid Effectiveness and Accra Agenda for Action, the development community has reached a broad consensus on what constitutes good practice for the delivery of development assistance. But since these high-level agreements were made, there has been almost no independent quantitative analysis of whether donors are meeting the standards they have set for themselves.
Topic:
Development, Humanitarian Aid, Poverty, Treaties and Agreements, and Foreign Aid
Political Geography:
Paris

14. Migration as a Tool for Disaster Recovery: U.S. Policy Options in the Case of Haiti

Author:
Michael Clemens and Tejaswi Velayudhan
Publication Date:
10-2011
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
The United States should take modest steps to create a legal channel for limited numbers of people fleeing natural disasters overseas to enter the United States. This would address two related problems: the lack of any systematic U.S. policy to help the growing numbers of people displaced across borders by natural disasters and the inability of U.S. humanitarian relief efforts to reduce systemic poverty or sustainably improve victims' livelihoods. The aftermath of the 2010 Haiti earthquake presents a compelling case study of the administrative and legislative ways the U.S. government could address both problems. Migration is already a proven and powerful force for reducing Haitians' poverty. A few modest changes in the U.S. approach could greatly aid Haiti's recovery.
Topic:
Humanitarian Aid, Migration, and Developing World
Political Geography:
United States, Caribbean, and Haiti

15. More Money or More Development: What Have the MDGs Achieved?

Author:
Charles Kenny and Andy Sumner
Publication Date:
12-2011
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
What have the MDGs achieved? And what might their achievements mean for any second generation of MDGs or MDGs 2.0? We argue that the MDGs may have played a role in increasing aid and that development policies beyond aid quantity have seen some limited improvement in rich countries (the evidence on policy change in poor countries is weaker). Further, there is some evidence of faster-than-expected progress improving quality of life in developing countries since the Millennium Declaration, but the contribution of the MDGs themselves in speeding that progress is—of course—difficult to demonstrate even assuming the MDGs induced policy changes after 2002. The paper concludes with reflections on what the experience of MDGs in terms of global goal setting has taught us and how things might be done differently if there were to be a new set of MDGs after 2015. Any MDGs 2.0 need targets that are set realistically and directly link aid flows to social policy change and to results.
Topic:
Development, Economics, Humanitarian Aid, Poverty, and Foreign Aid

16. Beyond Aid: Migration as a Tool for Disaster Recovery

Author:
Michael Clemens and Kaci Farrell
Publication Date:
06-2011
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
Natural disasters such as earthquakes, floods, and hurricanes can devastate people's lives and a country's economy, particularly in the developing world. More than 200,000 people perished when a catastrophic earthquake struck Haiti in January 2010, and Americans responded with an outpouring of private and public assistance. Those relief efforts, as they nearly always do, focused primarily on delivering aid. The United States barely used another tool for disaster relief: migration policy. This policy brief explores the various legal channels through which the U.S. government could, after future overseas disasters, leverage the power of migration to help limited numbers of people. We describe what could have been done for Haiti, but the lessons apply to future scenarios.
Topic:
Humanitarian Aid, Migration, Natural Disasters, and Foreign Aid
Political Geography:
United States

17. Migration as a Tool for Disaster Recovery: A Case Study on U.S. Policy Options for Post-Earthquake Haiti

Author:
Royce Bernstein Murray and Sarah Petrin Williamson
Publication Date:
06-2011
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
After a natural catastrophe in a developing country, international migration can play a critical role in recovery. But the United States has no systematic means to leverage the power and cost-effectiveness of international migration in its post-disaster assistance portfolios. Victims of natural disasters do not qualify as refugees under U.S. or international law, and migration policy toward those fleeing disasters is set in a way that is haphazard and tightly constrained. This paper comprehensively explores the legal means by which this could change, allowing the government more flexibility to take advantage of migration policy as one inexpensive tool among many tools for post-disaster assistance. It explores both the potential for administrative actions under current law and the potential for small changes to current law. For concreteness, it focuses on the case of the 2010 earthquake in Haiti, but its policy lessons apply to future disasters that are sadly certain to arrive. The paper neither discusses nor recommends "opening the gates" to all disaster victims, just as current U.S. refugee law does not open the gates to all victims of persecution, but rather seeks to identify those most in need of protection and provide a legal channel for entry and integration into American life.
Topic:
Humanitarian Aid, Migration, Natural Disasters, and Foreign Aid
Political Geography:
United States

18. New SME Financial Access Initiatives: Private Foundations' Path to Donor Partnerships

Author:
Benjamin Leo
Publication Date:
06-2011
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
In recent years, a number of private foundations and organizations have launched ambitious initiatives to support promising entrepreneurs in developing countries, on both a for-profit and not-for-profit basis. Many of these programs have focused exclusively on building business capacity. While these tailored programs play an important role in supporting small- and medium-sized enterprise (SME) development, their overall effectiveness remains hamstrung in part by continuing constraints on entrepreneurs' access to expansion and operating capital. Simultaneously, the U.S. government, other bilateral donors, and international financial institutions (IFIs) have launched a series of initiatives that provide both financial and technical assistance to SMEs in developing countries. Surprisingly, collaboration or formalized partnerships between private foundations and donor agencies has been somewhat limited-particularly on a strategic or globalized basis. This paper is targeted for these private foundations, especially those focused on women entrepreneurship. First, it provides a brief literature review of the rationale for and against SME initiatives. Second, it presents an overview of existing targeted USG and IFI programs. Lastly, it offers several new, incremental options for private foundations to establish focused partnerships with donor agencies in support of their ongoing organizational goals.
Topic:
Development, Humanitarian Aid, and Foreign Aid
Political Geography:
United States

19. Find Me the Money: Financing Climate and Other Global Public Goods

Author:
Nancy Birdsall and Benjamin Leo
Publication Date:
04-2011
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The global community faces a number of critical challenges ranging from climate change to crossborder health risks to natural-resource scarcities. Many of these so-called global commons problems carry grave risks to economic growth in the developing world and to the livelihoods and welfare of their people. Climate change is the classic example. Despite the risks involved, donor governments have funded programs addressing global challenges such as climate change at far lower levels than traditional programs of country-based development assistance. The prospects for dealing with such global challenges will depend at least in part on new collective financing mechanisms.
Topic:
Climate Change, Development, Health, Humanitarian Aid, and Foreign Aid

20. How Can Bill and Melinda Gates Increase Other People\'s Donations to Fund Public Goods?

Author:
Dean Karlan and John A. List
Publication Date:
04-2011
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
We develop a simple theory which formally describes how charities can resolve the information asymmetry problems faced by small donors by working with large donors to generate quality signals. To test the model, we conducted two large-scale natural field experiments. In the first experiment, a charity focusing on poverty reduction solicited donations from prior donors and either announced a matching grant from the Bill and Melinda Gates Foundation, or made no mention of a match. In the second field experiment, the same charity sent direct mail solicitations to individuals who had not previously donated to the charity, and tested whether naming the Bill and Melinda Gates Foundation as the matching donor was more effective than not identifying the name of the matching donor. The first experiment demonstrates that the matching grant condition generates more and larger donations relative to no match. The second experiment shows that providing a credible quality signal by identifying the matching donor generates even more and larger donations than not naming the matching donor. Importantly, the treatment effects persist long after the matching period, and the quality signal is quite heterogeneous—the Gates\' effect is much larger for prospective donors who had a record of giving to "poverty-oriented" charities. These two pieces of evidence support our model of quality signals as a key mechanism through which matching gifts inspire donors to give.
Topic:
Development, Government, Humanitarian Aid, Markets, and Foreign Aid
Political Geography:
United States

21. West African Experience with the World Rice Crisis, 2007–2008

Author:
Vijaya Ramachandran, Peter Timmer, Steven Block, and Jenny C. Aker
Publication Date:
02-2011
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Rice production in Africa has tended to be low-yielding, geographically dispersed, and uncompetitive against low-cost Asian imports, even when protected by high freight costs and substantial trade barriers. Skyrocketing prices in world markets in 2007—08 were a shock to African consumers, producers, and governments alike. When international rice prices were relatively low, rice imports did not pose economic or political problems for West African governments. Extremely expensive imports reverse that equation. This paper addresses the response to that reversal first by presenting a historical review of trends in the West African rice sector and, second, by assessing the effect of world rice prices on domestic prices, primarily at the consumer level.
Topic:
Humanitarian Aid and Food
Political Geography:
Africa and Asia

22. TrAid+ Channeling Development Assistance to Results

Author:
Alex Ergo and Ingo Puhl
Publication Date:
03-2011
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Development assistance is meant to improve the lives of poor people in developing countries, but the effectiveness of aid in meeting this goal is uncertain. Demonstrating failure—or success—is difficult because traditional donor financing mechanisms track inputs, not results. This is compounded by poor coordination between actors and a lack of transparency, accountability, and country ownership. Development assistance that is ineffective or has unknown outcomes wastes resources, erodes the constituency for aid, and most importantly fails to improve the lives of poor people as much as it could. TrAid+ is a new mechanism that aims to address these problems by creating a market for certified development outputs—outputs for which both the delivery and the quality have been verified. By ensuring that these outputs, such as safe deliveries or gas connections, meet certain standards, trAid+ acts as a third-party stamp of approval that donors, tax payers, recipient-country governments, service providers, and beneficiaries can trust to know that their aid is being used effectively and is contributing to the development objectives of the recipient country. And trAid+ makes all information accessible online, making it easier for funders to link with projects that are working and projects that are working to link with anyone interested in purchasing certified development outputs. TrAid+ can be tailored to any sector where outputs can be clearly defined and measured, whether health, education, infrastructure, or agriculture. This paper describes the trAid+ concept in detail and proposes practical steps to establish the trAid+ platform.
Topic:
Development, Humanitarian Aid, Poverty, and Foreign Aid

23. Are Funding Decisions Based on Performance?

Author:
Nandini Oomman, Steven Rosenzweig, and Michael Bernstein
Publication Date:
04-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
To what extent do the major funders of HIV/AIDS programs in developing countries use past performance to guide decisions about future funding? This question is important for those concerned with the effectiveness of the significant funding flows for the treatment, care, and prevention of HIV and AIDS: linking funding to performance can help ensure that the best programs are given continued resources (and the failing ones are not) and that program managers have the strongest incentives to perform at a high level and to improve the performance of their programs. Performance-based funding can also have unintended negative consequences. Linking funding to performance can also induce single-minded attention to specific targets to the exclusion of harder-to-measure but important outcomes and loss of integrity of information systems.
Topic:
Humanitarian Aid, Non-Governmental Organization, Foreign Aid, and World Bank
Political Geography:
United States

24. Financing Food Assistance: Options for the World Food Programme to Save Lives and Dollars

Author:
Vijaya Ramachandran, Benjamin Leo, and Owen McCarthy
Publication Date:
04-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The World Food Programme has world-class logistics, but its ability to manage financial risk is extremely limited. The WFP procures 100 percent of its food through spot markets, which subjects it to substantial commodity and transport price risks and significant delays delivering food. Relying on reactive emergency appeals and on donors that tend to earmark contributions and make commitments one year at a time only adds to operational inflexibility and uncertainty.
Topic:
Humanitarian Aid and Food
Political Geography:
United States

25. Bridging the Gap: Better, Faster, and Cheaper Clinical Trials for Health Products for Neglected Diseases

Author:
Thomas Bollyky
Publication Date:
06-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
There has been tremendous progress over the last decade in the development of health products for neglected diseases. These include drugs, vaccines, and diagnostics for malaria and tuberculosis, which kill millions of people annually, plus other diseases like chagas and dengue fever, which may less familiar, but nonetheless exact a large and often lethal toll in the world's poorest communities. Led by product development public private partnerships (PDPs) and fueled by the support of the Bill Melinda Gates Foundation, the National Institutes of Health, and other donors, there are now dozens of candidate products in the pipeline.
Topic:
Development, Health, Humanitarian Aid, and Infectious Diseases

26. Not Just Aid: How Making Government Work Can Transform Africa

Author:
Tony Blair
Publication Date:
12-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Country ownership has become the new watchword in development. The problem for traditional donors is that ownership is too often code for convincing developing country governments to adopt the donors' agenda as their own: a way of securing influence without imposing conditionality. What is really needed is genuine country leadership. As President Obama said when he announced the United States' new development policy at the UN Millennium Development Goals summit in New York in September, “We will partner with countries that are willing to take the lead. Because the days when your development was dictated in foreign capitals must come to an end.”
Topic:
Development, Human Welfare, Humanitarian Aid, and Foreign Aid
Political Geography:
Africa, United States, New York, and United Nations

27. Giving Money Away? The Politics of Direct Distribution in Resource Rich States

Author:
Alexandra Gillies
Publication Date:
11-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The governments of resource rich states have several options for how to allocate oil and mineral revenues, including the direct distribution of revenues to their citizens. This paper discusses the political feasibility and political implications of such cash transfers in the specific context of resource-rich states. Identifying the contexts in which this policy is mostly likely to emerge, and understanding the potential governance risks and benefits, will help policymakers to consider the desirability of cash transfers as an allocation choice.
Topic:
Development, Humanitarian Aid, Poverty, Foreign Aid, and Foreign Direct Investment

28. Think Long Term: How Global AIDS Donors Can Strengthen the Health Workforce in Africa

Author:
Nandini Oomman and Christina Droggitis
Publication Date:
09-2010
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
For the past decade, global AIDS donors—including the U.S. President's Emergency Plan for AIDS Relief (PEFPAR), the Global Fund to Fight AIDS, Tuberculosis and Malaria (the Global Fund), and the World Bank's Multi-Country HIV/AIDS Program for Africa (the MAP)—have responded to HIV/AIDS in sub-Saharan Africa as an emergency. Financial and programmatic efforts have been quick, vertical, and HIV-specific. To achieve ambitious HIV/AIDS targets, AIDS donors mobilized health workers from weak and understaffed national health workforces. The shortages were the result of weak data for effective planning, inadequate capacity to train and pay health workers, and fragmentation and poor coordination across the health workforce life-cycle. Ten years and billions of dollars later, the problem still persists. The time has passed for short-term fixes to health workforce shortages. As the largest source of global health resources, AIDS donors must begin to address the long-term problems underlying the shortages and the effects of their efforts on the health workforce more broadly.
Topic:
Development, Globalization, Health, Human Welfare, Humanitarian Aid, and Foreign Aid
Political Geography:
Africa

29. Performance Incentives for Global Health: Potential and Pitfalls

Author:
Rena Eichler and Ruth Levine
Publication Date:
05-2009
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
Global health donors, like national governments, have traditionally paid for inputs such as doctors' salaries or medical equipment in the hope that they would lead to better health. Performance incentives offered to health workers, facility managers, or patients turn the equation on its head: they start with the performance targets and let those most directly affected decide how to achieve them. Funders pay (in money or in kind) when health providers or patients reach specified goals. Evidence shows that such incentives can work in a variety of settings. But making them effective requires careful planning, implementation, and monitoring and evaluation.
Topic:
Health, Humanitarian Aid, Third World, and Foreign Aid

30. Making Markets for Merit Goods: The Political Economy of Antiretrovirals

Author:
Ethan Kapstein and Josh Busby
Publication Date:
08-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper examines the role of policy entrepreneurs and global activists in shaping the international market for antiretroviral drugs to combat HIV/AIDS. When ARVs first came on the market in the 1990s they were exceedingly expensive; the cost of treatment was upwards of $10,000 per year. These drugs were thus accessible only to those patients who had high incomes. But in 2006, the “international community,” meeting at a United Nations General Assembly Special Session (UNGASS), made an astonishing pledge to those who were infected with HIV. It proclaimed that there should be universal access to ARV treatment. This UNGASS, following up on an earlier historic UN special session devoted entirely to AIDS in 2001, marked the first time in history that the international community pledged itself to chronic care for the ill, which in this case includes the approximately 30 million people around the world estimated to be HIV positive. How do we explain the transformation of ARVs from private goods, which only a few could afford, into merit goods that were (at least declaratively) to be made available to everyone? In other words, how does a norm of “universal access to treatment”—that no person should be denied these life-extending drugs—become the ethical basis for global public policy with respect to pharmaceutical allocation? What are the lessons of the ARV story for other global issues? These are the primary questions we explore in this paper. Briefly, we argue that the policy entrepreneurs and activists who promoted the creation of a universal access to treatment regime—of the transformation of ARVs into global merit goods—relied on a combination of moral arguments and ideas with favorable material circumstances. From the ethical perspective, the task of these entrepreneurs was to convince the “international community” that access to ARVs was a “human right,” or conversely to convince decision-makers that it was morally wrong to allocate these life-enhancing drugs solely on the basis of ability to pay. But from a material standpoint, these arguments were greatly facilitated by the lowering prices of ARVs caused by a combination of differential pricing (that is, lower prices for drugs in the developing world than in the advanced welfare states) and competition from generics producers, coupled with increases in foreign aid spending devoted to HIV/AIDS and other diseases.
Topic:
Health, Human Welfare, Humanitarian Aid, and Political Economy

31. AIDS Treatment in South Asia: Equity and Efficiency Arguments for Shouldering the Fiscal Burden When Prevalence Rates Are Low

Author:
Mead Over
Publication Date:
02-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The slower spread of AIDS in South Asian countries, combined with the fact that most South Asian countries have higher per capita incomes than the most severely affected countries of other regions imply that the various impacts of the disease will be smaller in South Asia than in the worst affected countries in other regions. While justified with respect to the impact of the disease on economic output, on poverty, or on orphanhood, this conclusion does not follow with respect to the health sector, where the relatively minor public role in health care delivery and the entrepreneurial and heterogeneous private health and pharmaceutical sectors combine to magnify the potential impact of the epidemic.
Topic:
Health and Humanitarian Aid
Political Geography:
South Asia and Asia

32. Rice Crisis Forensics: How Asian Governments Carelessly Set the World Rice Market on Fire

Author:
Tom Slayton
Publication Date:
03-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The world rice market was aflame last spring and for several months it looked as if the trading edifice that had exhibited such resilience over the last two decades was going to burn to the ground. World prices trebled within less than four months and reached a 30- year inflation-adjusted high. Many market observers thought the previous record set in 1974 would soon be toast. The fire was man-made, not the result of natural developments. While the governments in India, Vietnam, and the Philippines did not to set the world market on fire, that was the unintended result of their actions which threatened both innocent bystanders (low-income rice importers as far away as Africa and Latin America) and, ultimately, poor rice consumers at home. This paper describes what sparked the fire and the accelerants that made a bad situation nearly catastrophic. Fortuitously, when the flames were raging at peak intensity, rain clouds appeared, the winds [market psychology] shifted, and conditions on the ground improved, allowing the fire to die down. It remains to be seen, however, if the trading edifice has been seriously undermined by the actions of decision makers in several key Asian rice exporting and importing countries. In describing the cascading negative effects of these seemingly rational domestic policies, this paper aims to help policy makers in the rice exporting and importing nations to avoid a repeat of the disastrous price spike of 2008.
Topic:
Agriculture, Economics, Health, Humanitarian Aid, Markets, and Political Economy
Political Geography:
Africa, India, Asia, and Latin America

33. Coping with Rising Food Prices: Policy Dilemmas in the Developing World

Author:
Nora Lustig
Publication Date:
03-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Rising food prices cause considerable policy dilemmas for developing country governments. Letting domestic prices adjust to reflect the full change in international prices generates inflationary pressures and causes severe hardship for poor households lacking access to social safety nets. Alternatively, governments can use food subsidies or export restrictions to stabilize domestic prices, yet this exacerbates global food price increases and undermines a rules-based trading system. The recent episode shows that many countries chose to shift the burden of adjustment back to international markets. The use of corn and oilseed for the production of biofuel will result in a recurrence of such episodes in the foreseeable future.
Topic:
Agriculture, Development, Humanitarian Aid, and Markets

34. The End of ODA: Death and Rebirth of a Global Public Policy

Author:
Jean-Michel Severino and Olivier Ray
Publication Date:
03-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The world of international development assistance is undergoing three concomitant revolutions, which concur to the emergence of a truly global policy. First, it is living through a diversification of the goals it is asked to pursue: to its traditional objective of ushering convergence between less and more developed economies have progressively been adjoined those of financing access to essential services and protecting global public goods. Secondly, faced with this new array of challenges, the world of development aid has demonstrated an impressive capacity to increase the number and diversity of its players, generating a governance conundrum for this eminently fragmented global policy. Thirdly, the instruments used by this expanding array of actors to achieve a broader range of policy objectives have themselves mushroomed, in the wake of innovations in mainstream financial markets. Yet surprisingly, this triple revolution in goals, actors and tools has not yet impacted the way we measure both the financial volumes dedicated to this emerging global policy nor the concrete impacts it aims to achieve. This paper argues for the need to move from the conventional measure of Official Development Assistance to the construction of clearer benchmarks for what ultimately matters: resources and results that concur to 21st century international development.
Topic:
Development, Humanitarian Aid, Post Colonialism, Poverty, and Third World

35. Estimating Fully Observed Recursive Mixed-Process Models with cmp

Author:
David Roodman
Publication Date:
04-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
At the heart of many econometric models is a linear function and a normal error. Examples include the classical small-sample linear regression model and the probit, ordered probit, multinomial probit, Tobit, interval regression, and truncated-distribution regression models. Because the normal distribution has a natural multidimensional generalization, such models can be combined into multi-equation systems in which the errors share a multivariate normal distribution. The literature has historically focused on multi-stage procedures for estimating mixed models, which are more efficiently computationally, if less so statistically, than maximum likelihood (ML). But faster computers and simulated likelihood methods such as the Geweke, Hajivassiliou, and Keane (GHK) algorithm for estimating higher-dimensional cumulative normal distributions have made direct ML estimation practical. ML also facilitates a generalization to switching, selection, and other models in which the number and types of equations vary by observation. The Stata module cmp fits Seemingly Unrelated Regressions (SUR) models of this broad family. Its estimator is also consistent for recursive systems in which all endogenous variables appear on the right-hand-sides as observed. If all the equations are structural, then estimation is full-information maximum likelihood (FIML). If only the final stage or stages are, then it is limited-information maximum likelihood (LIML). cmp can mimic a dozen built-in Stata commands and several user-written ones. It is also appropriate for a panoply of models previously hard to estimate. Heteroskedasticity, however, can render it inconsistent. This paper explains the theory and implementation of cmp and of a related Mata function, ghk2(), that implements the GHK algorithm.
Topic:
Development, Humanitarian Aid, Poverty, and Third World

36. What Is Poverty Reduction?

Author:
Owen Barder
Publication Date:
04-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
There is a healthy debate about how to achieve poverty reduction in developing countries, but not enough discussion of what we mean by “poverty reduction.” “Poverty reduction” is often used as a short-hand for promoting economic growth that will permanently lift as many people as possible over a poverty line. But there are many different objectives that are consistent with “poverty reduction,” and we have to make choices between them. There are trade-offs between tackling current and future poverty, between helping as many poor people as possible and focusing on those in chronic poverty, and between measures that tackle the causes of poverty and those which deal with the symptoms. Because donors focus on just one dimension of poverty reduction (growth) they marginalise other legitimate objectives such as reducing chronic poverty or providing social services in countries that cannot otherwise afford them.
Topic:
Development, Environment, Humanitarian Aid, Poverty, Third World, and Foreign Aid

37. Through the Looking-Glass, and What OLS Found There: On Growth, Foreign Aid, and Reverse Causality

Author:
David Roodman
Publication Date:
01-2008
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The cross-country literature on foreign aid effectiveness has relied on the use of instruments to distinguish causality from mere correlation. This paper uses simple non-instrumental techniques in the spirit of Granger to demonstrate that the main aid-growth connection is a negative causal relationship from growth to aid—aid, that is, as a fraction of recipient GDP. Coarsely, when GDP goes up, aid/GDP goes down. The endogeneity of aid, long-suspected, is real. Less understood is that adding certain common controls to regressions puts this relationship through the looking-glass, flipping both its sign and apparent direction: aid seems to cause growth. Ideally, instrumentation expunges the endogeneity shown here. In practice, estimates of aid's impact have run into problems. Autocorrelation in the errors is widespread, and can render endogenous lagged variables used as regressors or instruments. The pitfalls of “difference” and “system” include invalidity and proliferation of instruments. Multicollinearity in term pairs of interest, such as aid and aid or “project” and “program” aid, can amplify endogeneity bias. The combination of specification problems and widespread fragility (shown in earlier work) leads to pessimism about the ability of cross-country econometrics to demonstrate aid effectiveness. This does not rule an average positive effect, nor does it contradict the fact that aid has saved millions of lives, but it does suggest that the average effect on economic growth is too small to be detected statistically.
Topic:
Economics, Humanitarian Aid, and International Political Economy

38. Prevention Failure: The Ballooning Entitlement Burden of U.S. Global AIDS Treatment Spending and What to Do About It - Working Paper 144

Author:
Mead Over
Publication Date:
05-2008
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
U.S. global AIDS spending is helping to prolong the lives of more than a million people and is widely seen as a foreign policy and humanitarian success. Yet this success contains the seeds of a future crisis. Life-long treatment costs are increasing as those on treatment live longer, and the number of new HIV infections continues to outpace the number of people receiving treatment. Escalating treatment costs coupled with neglected prevention measures threaten to squeeze out U.S. spending on other global health needs, even to the point of consuming half of the entire U.S. foreign assistance budget by 2016.
Topic:
Foreign Policy and Humanitarian Aid
Political Geography:
Africa and United States

39. Inexcusable Absence: Why 60 Million Girls Still Aren't in School and What to do About It

Author:
Marlaine Lockheed and Maureen Lewis
Publication Date:
04-2007
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The images of girls returning to school in Afghanistan after the fall of the Taliban drew attention to the lack of educational opportunities for girls all too common in many developing countries. Girls' education is indisputably crucial to development, and the development community has worked hard to get more of them into school. The result: since 1960, there have been remarkable increases in primary school enrollment rates for both boys and girls in developing countries. In most countries, girls' participation has converged with that of boys, bringing gender equity to the educational systems of many poor countries. But the international community has largely overlooked a key issue: that out of the remaining 60 million girls ages 6-11 still not in school, 70 percent belong to socially excluded groups.
Topic:
International Relations, Education, Gender Issues, and Humanitarian Aid
Political Geography:
Afghanistan and Taliban

40. Cost-Effective Prevention of Diarrheal Diseases: A Critical Review

Author:
Michael Kremer and Alix Peterson Zwane
Publication Date:
04-2007
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper critically reviews the existing research on the cost-effective prevention and treatment of diarrheal diseases, and identifies research priorities in this area aimed at finding ways to reduce the diarrheal disease burden. In contrast to the empirical knowledge base that exists for traditional child health programs to reduce diarrheal morbidity and mortality, evidence on the relative effectiveness and cost-effectiveness of various environmental health interventions is limited and subject to significant methodological concerns. There is a limited understanding of the determinants of long-term water and sanitation technology adoption and behavior change at the individual level. Even less is known about how collective action problems in water and sanitation infrastructure maintenance can be overcome. An agenda for future research includes evaluating alternative transmission interruption mechanisms, improving understanding of the determinants of individual-level technology adoption in the water and sanitation sector, and assessing the quality of infrastructure maintenance under different management schemes.
Topic:
Health, Human Welfare, Humanitarian Aid, and Poverty

41. Income Distribution: Effects on Growth and Development

Author:
Nancy Birdsall
Publication Date:
04-2007
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
I review the literature on the effects of inequality on growth and development in the developing world. Two stylized facts emerge from empirical studies: inequality is more likely to harm growth in countries at low levels of income (below about $3200 per capita in 2000 dollars); and it is at high levels of inequality (at or above a Gini coefficient of .45) that a negative association emerges. Between 15 and 40 percent of the developing world's population lives in countries with these characteristics, depending on the inclusion of China, whose level of inequality has recently been measured at almost .45. Theory and evidence suggest that high inequality affects growth: (1) through interaction with incomplete and underdeveloped markets for capital and information; (2) by discouraging the evolution of the economic and political institutions associated with accountable government (which in turn enable a market environment conducive to investment and growth); and (3) by undermining the civic and social life that sustains effective collective decision-making.
Topic:
Development, Humanitarian Aid, Political Economy, and Poverty
Political Geography:
China

42. Performance-based Incentives for Health: Demand- and Supply-Side Incentives in the Nicaraguan Red de Protección Social

Author:
Ferdinando Regalía and Leslie Castro
Publication Date:
04-2007
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Nicaragua's Red de Protección Social (RPS) is one of the first conditional cash transfer (CCT) programs implemented in a low-income country. Demand-side incentives, in the form of monetary transfers, are provided to poor households on condition that their children attend school and visit preventive health care providers. The design of the program is unique among CCT programs because these demand-side incentives are complemented by supply-side incentives aimed at improving the provision of health care. Health care providers are paid on the basis of their performance against predetermined targets. Both private and nonprofit health care providers contracted by the government extend the coverage of services to previously underserved areas.
Topic:
Development, Health, and Humanitarian Aid
Political Geography:
Latin America

43. Performance-Based Incentives for Health: Conditional Cash Transfer Programs in Latin America and the Caribbean

Author:
Amanda Glassman, Jessica Todd, and Marie Gaarder
Publication Date:
04-2007
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
In order to support poor families in the developing world to seek and use health care, a multi-pronged strategy is needed on both the supply and the demand side of health care. A demand-side program called Conditional Cash Transfers (CCTs) strives to reduce poverty and also increase food consumption, school attendance, and use of preventive health care. Since 1997, seven countries in Latin America have implemented and evaluated CCT programs with health and nutrition components. The core of the program is based on encouraging poor mothers to seek preventive health services and attend health education talks by providing a cash incentive for their healthy behavior (with healthy behavior representing performance). Evaluations of these programs measured outputs in the utilization of services; health knowledge, attitudes, and practice; food consumption; the supply and quality of services; as well as outcomes in vaccination rates; nutritional status; morbidity; mortality; and fertility.
Topic:
Development, Health, and Humanitarian Aid
Political Geography:
Latin America

44. Performance-Based Incentives for Health: Six Years of Results from Supply-Side Programs in Haiti

Author:
Amanda Glassman, Jessica Todd, and Marie Gaarder
Publication Date:
04-2007
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
USAID launched a project in 1995 to deliver basic health services in Haiti. The project began by reimbursing contracted NGOs for documented expenditures or inputs. In 1999, payment was changed to being based partly on attaining performance targets or outputs. The project also provided technical assistance to the NGOs, along with opportunities to participate in an NGO network and other cross-fertilization activities. Remarkable improvements in key health indicators have been achieved in the six years since payment for performance was phased in. Although it is difficult to isolate the effects of performance-based payment on these improved indicators from the efforts aimed at strengthening NGOs and other factors, panel regression results suggest that the new payment incentives were responsible for considerable improvements in both immunization coverage and attended deliveries. Results for prenatal and postnatal care were less significant, perhaps suggesting a strong patient behavioral element that is not under the influence of provider actions.
Topic:
Development, Health, and Humanitarian Aid
Political Geography:
Caribbean and Haiti

45. Performance-Based Incentives for Health: A Way to Improve Tuberculosis Detection and Treatment Completion?

Author:
Rena Eichler, Diana Weil, and Alexandra Beith
Publication Date:
04-2007
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Tuberculosis is a public health emergency in Africa, Eastern Europe, and Central Asia. Of the estimated 1.7 million deaths from TB, 98 percent are in the developing world, the majority being among the poor. In order to reach the MDG and the Stop TB partnership targets for 2015, TB detection rates need to double, treatment success rates must increase to more than 7075 percent, and strategies to address HIV-associated TB and multi-drug resistant TB must be aggressively expanded. DOTS, the internationally-recommended TB control strategy is the foundation of TB control efforts worldwide. A standard recording and monitoring system built on routine service-based data allows nearly all countries in the world to track progress in case detection and treatment completion through routine monitoring. This provides a good base for measuring the impact of different strategies for improving TB control outcomes.
Topic:
Development, Health, Human Welfare, and Humanitarian Aid
Political Geography:
Africa, Central Asia, and Eastern Europe

46. Do No Harm: Aid, Weak Institutions, and the Missing Middle in Africa

Author:
Nancy Birdsall
Publication Date:
03-2007
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The implicit assumption of the donor community is that Africa is trapped by its poverty, and that aid is necessary if Africa is to escape the trap. In this note I suggest an alternative assumption: that Africa is caught in an institutional trap, signaled and reinforced by the small share of income of its independent middle-income population. Theory and historical experience elsewhere suggest that a robust middle-income group contributes critically to the creation and sustenance of healthy institutions, particularly healthy institutions of the state. I propose that if external aid is to be helpful for institution-building in Africa's weak and fragile states, donors need to emphasize not providing more aid but minimizing the risks more aid poses for this group in Africa.
Topic:
Corruption, Development, Government, and Humanitarian Aid
Political Geography:
Africa

47. Why Are There So Few Black-Owned Firms in Africa? Preliminary Results from Enterprise Survey Data

Author:
Vijaya Ramachandran and Manju Kedia Shah
Publication Date:
01-2007
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Much of the growth in Sub-Saharan Africa in the past decade has come from extractive industries, rather than from private, entrepreneurial activity. Furthermore, non-extractive activity in the private sector is often dominated by firms owned by ethnic minorities. This paper analyzes the characteristics of the formal private sector in five countries in sub-Saharan Africa, with a particular emphasis on Black African-owned (indigenous) firms. We find that indigenous firms start smaller and grow more slowly; however their rate of growth is positively influenced by whether the owner-entrepreneur has a university degree. We do not find overwhelming evidence that credit is the binding constraint but we do find that indigenous firms get less access to trade credit than firms owned by minority entrepreneurs. Finally, we discuss policy solutions that might enable a larger number of indigenous entrepreneurs to enter and survive in a vibrant, multi-ethnic private sector.
Topic:
International Relations, Development, Economics, and Humanitarian Aid
Political Geography:
Africa

48. An Index of Donor Performance

Author:
David Roodman
Publication Date:
11-2006
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The Commitment to Development Index of the Center for Global Development rates 21 rich countries on the “development-friendliness” of their policies. It is revised and updated annually. The component on foreign assistance combines quantitative and qualitative measures of official aid, and of fiscal policies that support private charitable giving. The quantitative measure uses a net transfers concept, as distinct from the net flows concept in the net Official Development Assistance measure of the Development Assistance Committee. The qualitative factors are: a penalty for tying aid; a discounting system that favors aid to poorer, better-governed recipients; and a penalty for “project proliferation.” The charitable giving measure is based on an estimate of the share of observed private giving to developing countries that is attributable to a) lower overall taxes or b) specific tax incentives for giving. De-spite the adjustments, overall results are dominated by differences in quantity of official aid given. This is because while there is a seven-fold range in net concessional transfers/GDP among the scored countries, variation in overall aid quality across donors appears far lower, and private giving is generally small. Denmark, the Netherlands, Norway, and Sweden score highest while the largest donors in absolute terms, the United States and Japan, rank at or near the bottom. Standings by the 2006 methodology have been relatively stable since 1995.
Topic:
International Relations, Development, Economics, and Humanitarian Aid
Political Geography:
United States, Japan, Norway, and Netherlands

49. Fragile States and U.S. Foreign Assistance: Show Me the Money

Author:
Stewart Patrick and Kaysie Brown
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The Bush administration has increasingly acknowledged that weak and failing states represent the core of today's global development challenge. It has also recognized that such states are potential threats to international peace and security. But despite the rhetoric, it has yet to formulate a coherent strategy around fragile states or commit adequate resources towards engaging them. Excluding funding for Iraq, Afghanistan, Pakistan, and HIV/AIDS, the administration's FY07 budget request proposes to spend just $1.1 billion in direct bilateral assistance to fragile states—little more than a dollar per person per year. In this new working paper, CGD research fellow Stewart Patrick and program associate Kaysie Brown urge U.S. policymakers to consider increasing aid to fragile states and to think creatively about how and when to engage these troubled countries. The authors also call for the policy community to integrate non-aid instruments into a more coherent government strategy. To put its money where its mouth is, the U.S. should treat aid to weak and failing states as a form of venture capital, with high risk but potentially high rewards.
Topic:
Economics, Government, and Humanitarian Aid
Political Geography:
Pakistan, Afghanistan, United States, and Iraq

50. A Policymakers' Guide to Dutch Disease

Author:
Owen Barder
Publication Date:
07-2006
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
It is sometimes claimed that an increase in aid might cause Dutch Disease—that is, an appreciation of the real exchange rate which can slow the growth of a country's exports— and that aid increases might thereby harm a country's long-term growth prospects. This essay argues that it is unlikely that a long-term, sustained and predictable increase in aid would, through the impact on the real exchange rate, do more harm than good, for three reasons. First, there is not necessarily an adverse impact on exports from Dutch Disease, and any impact on economic growth may be small. Second, aid spent in part on improving the supply side—investments in infrastructure, education, government institutions and health—result in productivity benefits for the whole economy, which can offset any loss of competitiveness from the Dutch Disease effect. Third, the welfare of a nation's citizens depends on their consumption and investment, not just output. Even on pessimistic assumptions, the additional consumption and investment which the aid finances is larger than any likely adverse impact on output. However, the macroeconomic effects of aid can cause substantial harm if the aid is not sustained until its benefits are realized. The costs of a temporary loss of competitiveness might well exceed the benefits of the short-term increase in aid. To avoid doing harm, aid should be sustained and predictable, and used in part to promote economic growth. This maximizes the chances that the long-term productivity and growth benefits will offset the adverse effects—which may be small if they exist at all—that big aid surges may pose as a result of Dutch Disease.
Topic:
Economics, Health, and Humanitarian Aid
Political Geography:
Europe