Aid and Trust in Country Systems
The 2005 Paris Declaration on Aid Effectiveness sets targets for increased use by donors of recipient country systems for managing aid. A consensus view holds that country systems are strengthened when donors trust recipients to manage aid funds, b...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| 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_20090720134118 http://hdl.handle.net/10986/4197 |
| Summary: | The 2005 Paris Declaration on Aid
Effectiveness sets targets for increased use by donors of
recipient country systems for managing aid. A consensus view
holds that country systems are strengthened when donors
trust recipients to manage aid funds, but undermined when
donors manage aid through their own separate parallel
systems. This paper provides an analytical framework for
understanding donors decisions to trust in country systems
or instead to micro-manage aid using their own systems and
procedures. Where country systems are sufficiently weak, the
development impact of aid is reduced by donors reliance on
them. Trust in country systems will be sub-optimal, however,
if donors have multiple objectives in aid provision rather
than a sole objective of maximizing development outcomes.
Empirical tests are conducted using data from an OECD survey
designed to monitor progress toward Paris Declaration goals.
Trust in country systems is measured in three ways: use of
the recipient s public financial management systems, use of
direct budget support, and use of program-based approaches.
The authors show using fixed effects regression that a
donor s trust in recipient country systems is positively
related to (1) trustworthiness or quality of those systems,
(2) tolerance for risk on the part of the donor s
constituents, as measured by public support for providing
aid, and (3) the donor s ability to internalize more of the
benefits of investing in country systems, as measured by the
donor s share of all aid provided to a recipient. |
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