Sowing and Reaping : Institutional Quality and Project Outcomes in Developing Countries
Much of the academic debate on the effectiveness of foreign aid is centered on the relationship between aid and growth. Different aid-growth studies find conflicting results: aid promotes growth everywhere; aid has a zero or negative impact on growth everywhere; or the effect of aid on growth depend...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2005/02/5642288/sowing-reaping-institutional-quality-project-outcomes-developing-countries http://hdl.handle.net/10986/8885 |
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okr-10986-88852021-04-23T14:02:42Z Sowing and Reaping : Institutional Quality and Project Outcomes in Developing Countries Dollar, David Levin, Victoria AID AID ALLOCATION AID FLOWS CHECKLIST CIVIL LIBERTIES DEMOCRACY DEVELOPED COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT ISSUES DEVELOPMENT PROJECTS DIMINISHING RETURNS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICIES ECONOMIC REVIEW ECONOMICS ENDOWMENTS HEALTH SECTOR HUMAN CAPITAL HUMAN RIGHTS INCOME INTERNATIONAL COMPARISONS INTERNATIONAL DEVELOPMENT LAWS LOW-INCOME COUNTRIES NUTRITION POLICY RESEARCH POLITICAL INSTITUTIONS POLITICAL RIGHTS PRODUCTIVITY PROPERTY RIGHTS PUBLIC INVESTMENT PUBLIC SECTOR SAVINGS UNDERDEVELOPMENT Much of the academic debate on the effectiveness of foreign aid is centered on the relationship between aid and growth. Different aid-growth studies find conflicting results: aid promotes growth everywhere; aid has a zero or negative impact on growth everywhere; or the effect of aid on growth depends on recipient-specific characteristics, such as the quality of institutions and policies. Although these studies fuel an interesting debate, cross-sectional macroeconomic studies cannot be the last word on the topic of aid effectiveness. In this paper, Dollar and Levin introduce microeconomic evidence on factors conducive to the success of aid-funded projects in developing countries. The authors use the success rate of World Bank-financed projects in the 1990s, as determined by the Operations Evaluation Department, as their dependent variable. Using instrumental variables estimation, the authors find that existence of high-quality institutions in a recipient country raises the probability that aid will be used effectively. There is also some evidence that geography matters, but location in Sub-Saharan Africa is a more robust indicator of lower project success rate than tropical climate. The authors proceed to disaggregate the success rate of World Bank projects by lending instrument type and by investment sector, finding that different institutions are more important for different types of projects. The finding of a strong relationship between institutional quality and project success serves to provide further support to the hypothesis that aid effectiveness is conditional on institutions and policies of the recipient country. 2012-06-22T21:10:34Z 2012-06-22T21:10:34Z 2005-02 http://documents.worldbank.org/curated/en/2005/02/5642288/sowing-reaping-institutional-quality-project-outcomes-developing-countries http://hdl.handle.net/10986/8885 English Policy Research Working Paper; No. 3524 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
AID AID ALLOCATION AID FLOWS CHECKLIST CIVIL LIBERTIES DEMOCRACY DEVELOPED COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT ISSUES DEVELOPMENT PROJECTS DIMINISHING RETURNS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICIES ECONOMIC REVIEW ECONOMICS ENDOWMENTS HEALTH SECTOR HUMAN CAPITAL HUMAN RIGHTS INCOME INTERNATIONAL COMPARISONS INTERNATIONAL DEVELOPMENT LAWS LOW-INCOME COUNTRIES NUTRITION POLICY RESEARCH POLITICAL INSTITUTIONS POLITICAL RIGHTS PRODUCTIVITY PROPERTY RIGHTS PUBLIC INVESTMENT PUBLIC SECTOR SAVINGS UNDERDEVELOPMENT |
| spellingShingle |
AID AID ALLOCATION AID FLOWS CHECKLIST CIVIL LIBERTIES DEMOCRACY DEVELOPED COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT ISSUES DEVELOPMENT PROJECTS DIMINISHING RETURNS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICIES ECONOMIC REVIEW ECONOMICS ENDOWMENTS HEALTH SECTOR HUMAN CAPITAL HUMAN RIGHTS INCOME INTERNATIONAL COMPARISONS INTERNATIONAL DEVELOPMENT LAWS LOW-INCOME COUNTRIES NUTRITION POLICY RESEARCH POLITICAL INSTITUTIONS POLITICAL RIGHTS PRODUCTIVITY PROPERTY RIGHTS PUBLIC INVESTMENT PUBLIC SECTOR SAVINGS UNDERDEVELOPMENT Dollar, David Levin, Victoria Sowing and Reaping : Institutional Quality and Project Outcomes in Developing Countries |
| relation |
Policy Research Working Paper; No. 3524 |
| description |
Much of the academic debate on the effectiveness of foreign aid is centered on the relationship between aid and growth. Different aid-growth studies find conflicting results: aid promotes growth everywhere; aid has a zero or negative impact on growth everywhere; or the effect of aid on growth depends on recipient-specific characteristics, such as the quality of institutions and policies. Although these studies fuel an interesting debate, cross-sectional macroeconomic studies cannot be the last word on the topic of aid effectiveness. In this paper, Dollar and Levin introduce microeconomic evidence on factors conducive to the success of aid-funded projects in developing countries. The authors use the success rate of World Bank-financed projects in the 1990s, as determined by the Operations Evaluation Department, as their dependent variable. Using instrumental variables estimation, the authors find that existence of high-quality institutions in a recipient country raises the probability that aid will be used effectively. There is also some evidence that geography matters, but location in Sub-Saharan Africa is a more robust indicator of lower project success rate than tropical climate. The authors proceed to disaggregate the success rate of World Bank projects by lending instrument type and by investment sector, finding that different institutions are more important for different types of projects. The finding of a strong relationship between institutional quality and project success serves to provide further support to the hypothesis that aid effectiveness is conditional on institutions and policies of the recipient country. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Dollar, David Levin, Victoria |
| author_facet |
Dollar, David Levin, Victoria |
| author_sort |
Dollar, David |
| title |
Sowing and Reaping : Institutional Quality and Project Outcomes in Developing Countries |
| title_short |
Sowing and Reaping : Institutional Quality and Project Outcomes in Developing Countries |
| title_full |
Sowing and Reaping : Institutional Quality and Project Outcomes in Developing Countries |
| title_fullStr |
Sowing and Reaping : Institutional Quality and Project Outcomes in Developing Countries |
| title_full_unstemmed |
Sowing and Reaping : Institutional Quality and Project Outcomes in Developing Countries |
| title_sort |
sowing and reaping : institutional quality and project outcomes in developing countries |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2005/02/5642288/sowing-reaping-institutional-quality-project-outcomes-developing-countries http://hdl.handle.net/10986/8885 |
| _version_ |
1764407074183184384 |