Aid Tying and Donor Fragmentation
This study tests two opposing hypotheses about the impact of aid fragmentation on the practice of aid tying. In one, when a small number of donors dominate the aid market in a country, they may exploit their monopoly power by tying more aid to purc...
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| Format: | Policy Research Working Paper |
| Language: | English |
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2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20120105100233 http://hdl.handle.net/10986/3219 |
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okr-10986-32192021-04-23T14:02:08Z Aid Tying and Donor Fragmentation Knack, Stephen Smets, Lodewijk ADVERSE IMPACT AID AID COORDINATION AID FLOWS AID PROGRAMS AUTONOMY BILATERAL AID CAPITAL MARKETS CARTEL COMPANION COMPARATIVE ADVANTAGES COMPARATIVE ECONOMICS COMPETITIVENESS DEVELOPED COUNTRIES DEVELOPMENT AID DEVELOPMENT ASSISTANCE DEVELOPMENT BENEFITS DEVELOPMENT ECONOMICS DEVELOPMENT FINANCING DEVELOPMENT GOALS DEVELOPMENT IMPACT DEVELOPMENT ISSUES DEVELOPMENT OBJECTIVES DEVELOPMENT POLICY DEVELOPMENT RESEARCH DONOR AGENCIES DONOR AGENCY ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH EXCLUSION FOOD AID GAPS GDP GDP PER CAPITA INCLUSION INCOME INTERNATIONAL AID INTERNATIONAL DEVELOPMENT LDCS MONOPOLY MORAL HAZARD PER CAPITA INCOME PER CAPITA INCOMES POLITICAL ECONOMY PRIORITIES PUBLIC GOOD STAGFLATION STD STRESSES TECHNICAL ASSISTANCE TRANSACTIONS COSTS UTILITY FUNCTION VALUE ADDED WORLD DEVELOPMENT INDICATORS This study tests two opposing hypotheses about the impact of aid fragmentation on the practice of aid tying. In one, when a small number of donors dominate the aid market in a country, they may exploit their monopoly power by tying more aid to purchases from contractors based in their own countries. Alternatively, when donors have a larger share of the aid market, they may have stronger incentives to maximize the development impact of their aid by tying less of it. Empirical tests strongly and consistently support the latter hypothesis. The key finding -- that higher donor aid shares are associated with less aid tying -- is robust to recipient controls, donor fixed effects and instrumental variables estimation. When recipient countries are grouped by their scores on corruption perception indexes, higher shares of aid are significantly related to lower aid tying only in the less-corrupt sub-sample. This finding is consistent with the argument that aid tying can be an efficient response by donors when losses from corruption may rival or exceed losses from tying aid. When aid tying is more costly, as proxied by donor country size and income, it is less prevalent. Aid tying is lower in the Least Developed Countries, consistent with the OECD Development Assistance Committee's recommendation to its members. 2012-03-19T17:28:28Z 2012-03-19T17:28:28Z 2012-01-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20120105100233 http://hdl.handle.net/10986/3219 English Paper is funded by the Knowledge for Change Program (KCP),Policy Research working paper ; no. WPS 5934 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region The World Region |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ADVERSE IMPACT AID AID COORDINATION AID FLOWS AID PROGRAMS AUTONOMY BILATERAL AID CAPITAL MARKETS CARTEL COMPANION COMPARATIVE ADVANTAGES COMPARATIVE ECONOMICS COMPETITIVENESS DEVELOPED COUNTRIES DEVELOPMENT AID DEVELOPMENT ASSISTANCE DEVELOPMENT BENEFITS DEVELOPMENT ECONOMICS DEVELOPMENT FINANCING DEVELOPMENT GOALS DEVELOPMENT IMPACT DEVELOPMENT ISSUES DEVELOPMENT OBJECTIVES DEVELOPMENT POLICY DEVELOPMENT RESEARCH DONOR AGENCIES DONOR AGENCY ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH EXCLUSION FOOD AID GAPS GDP GDP PER CAPITA INCLUSION INCOME INTERNATIONAL AID INTERNATIONAL DEVELOPMENT LDCS MONOPOLY MORAL HAZARD PER CAPITA INCOME PER CAPITA INCOMES POLITICAL ECONOMY PRIORITIES PUBLIC GOOD STAGFLATION STD STRESSES TECHNICAL ASSISTANCE TRANSACTIONS COSTS UTILITY FUNCTION VALUE ADDED WORLD DEVELOPMENT INDICATORS |
| spellingShingle |
ADVERSE IMPACT AID AID COORDINATION AID FLOWS AID PROGRAMS AUTONOMY BILATERAL AID CAPITAL MARKETS CARTEL COMPANION COMPARATIVE ADVANTAGES COMPARATIVE ECONOMICS COMPETITIVENESS DEVELOPED COUNTRIES DEVELOPMENT AID DEVELOPMENT ASSISTANCE DEVELOPMENT BENEFITS DEVELOPMENT ECONOMICS DEVELOPMENT FINANCING DEVELOPMENT GOALS DEVELOPMENT IMPACT DEVELOPMENT ISSUES DEVELOPMENT OBJECTIVES DEVELOPMENT POLICY DEVELOPMENT RESEARCH DONOR AGENCIES DONOR AGENCY ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH EXCLUSION FOOD AID GAPS GDP GDP PER CAPITA INCLUSION INCOME INTERNATIONAL AID INTERNATIONAL DEVELOPMENT LDCS MONOPOLY MORAL HAZARD PER CAPITA INCOME PER CAPITA INCOMES POLITICAL ECONOMY PRIORITIES PUBLIC GOOD STAGFLATION STD STRESSES TECHNICAL ASSISTANCE TRANSACTIONS COSTS UTILITY FUNCTION VALUE ADDED WORLD DEVELOPMENT INDICATORS Knack, Stephen Smets, Lodewijk Aid Tying and Donor Fragmentation |
| geographic_facet |
The World Region The World Region |
| relation |
Paper is funded by the Knowledge for Change
Program (KCP),Policy Research working paper ; no. WPS 5934 |
| description |
This study tests two opposing hypotheses
about the impact of aid fragmentation on the practice of aid
tying. In one, when a small number of donors dominate the
aid market in a country, they may exploit their monopoly
power by tying more aid to purchases from contractors based
in their own countries. Alternatively, when donors have a
larger share of the aid market, they may have stronger
incentives to maximize the development impact of their aid
by tying less of it. Empirical tests strongly and
consistently support the latter hypothesis. The key finding
-- that higher donor aid shares are associated with less aid
tying -- is robust to recipient controls, donor fixed
effects and instrumental variables estimation. When
recipient countries are grouped by their scores on
corruption perception indexes, higher shares of aid are
significantly related to lower aid tying only in the
less-corrupt sub-sample. This finding is consistent with the
argument that aid tying can be an efficient response by
donors when losses from corruption may rival or exceed
losses from tying aid. When aid tying is more costly, as
proxied by donor country size and income, it is less
prevalent. Aid tying is lower in the Least Developed
Countries, consistent with the OECD Development Assistance
Committee's recommendation to its members. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Knack, Stephen Smets, Lodewijk |
| author_facet |
Knack, Stephen Smets, Lodewijk |
| author_sort |
Knack, Stephen |
| title |
Aid Tying and Donor Fragmentation |
| title_short |
Aid Tying and Donor Fragmentation |
| title_full |
Aid Tying and Donor Fragmentation |
| title_fullStr |
Aid Tying and Donor Fragmentation |
| title_full_unstemmed |
Aid Tying and Donor Fragmentation |
| title_sort |
aid tying and donor fragmentation |
| publishDate |
2012 |
| url |
http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20120105100233 http://hdl.handle.net/10986/3219 |
| _version_ |
1764386624287801344 |