Aid Tying and Donor Fragmentation

Knack, Stephen ; Smets, Lodewijk

关键词: ADVERSE IMPACT;    AID;    AID COORDINATION;    AID FLOWS;    AID PROGRAMS;   

DOI  :  10.1596/1813-9450-5934
RP-ID  :  WPS5934

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This study tests two opposing hypothesesabout the impact of aid fragmentation on the practice of aidtying. In one, when a small number of donors dominate theaid market in a country, they may exploit their monopolypower by tying more aid to purchases from contractors basedin their own countries. Alternatively, when donors have alarger share of the aid market, they may have strongerincentives to maximize the development impact of their aidby tying less of it. Empirical tests strongly andconsistently support the latter hypothesis. The key finding-- that higher donor aid shares are associated with less aidtying -- is robust to recipient controls, donor fixedeffects and instrumental variables estimation. Whenrecipient countries are grouped by their scores oncorruption perception indexes, higher shares of aid aresignificantly related to lower aid tying only in theless-corrupt sub-sample. This finding is consistent with theargument that aid tying can be an efficient response bydonors when losses from corruption may rival or exceedlosses from tying aid. When aid tying is more costly, asproxied by donor country size and income, it is lessprevalent. Aid tying is lower in the Least DevelopedCountries, consistent with the OECD Development AssistanceCommittee's recommendation to its members.