When Instability Increases the Effectiveness of Aid Projects
The authors assess the effect of economic instability on the success of projects funded by the World Bank using the outcome of the projects, which is a notation of their overall success determined by the Bank's Independent Evaluation Group. It has been argued in macroeconomic studies that aid e...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2006/10/7126764/instability-increases-effectiveness-aid-projects http://hdl.handle.net/10986/9017 |
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okr-10986-90172021-04-23T14:02:41Z When Instability Increases the Effectiveness of Aid Projects Guillaumont, Patrick Laajaj, Rachid ADVERSE EFFECTS AID AID ALLOCATION AID FLOWS BANK LOANS BUSINESS CYCLES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT ISSUES DEVELOPMENT OBJECTIVES DEVELOPMENT PROJECTS DEVELOPMENT RESEARCH DONOR AGENCIES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC INSTABILITY ECONOMIC RATE OF RETURN ECONOMIC STABILITY EXPORTS EXTERNALITIES FINANCIAL MARKETS GDP GOVERNMENT EXPENDITURES GROWTH RATE HEALTH STATUS HUMAN CAPITAL INCOME INCOME DISTRIBUTION INCOME GROUPS INCREASING RETURNS INCREASING RETURNS TO SCALE INFLATION INSTITUTIONS INTERNATIONAL AID MACROECONOMIC POLICIES MALNUTRITION POSITIVE EXTERNALITY POVERTY ALLEVIATION POVERTY REDUCTION PRIORITIES PRODUCTIVITY PROJECT EVALUATION PUBLIC FINANCE PUBLIC SERVICES RETURNS TO SCALE RISK AVERSE SELECTION BIAS SIDE EFFECTS SUSTAINABILITY The authors assess the effect of economic instability on the success of projects funded by the World Bank using the outcome of the projects, which is a notation of their overall success determined by the Bank's Independent Evaluation Group. It has been argued in macroeconomic studies that aid effectiveness is higher in vulnerable countries because it dampens the negative effects of shocks. The authors show that this finding is not inconsistent with the observation that the success of the projects is lower in an unstable environment. Instability, in particular the instability of exports, harms aid projects as it harms the rest of the economy, while the success of projects decreases when the total amount of aid received increases, due to absorptive capacity limitations. But this decrease is slower when instability is higher, showing a positive effect of aid through its stabilizing impact. The authors find the same results keeping only the projects funded by nonconcessionary loans, which suggests that the cushioning effect of aid extends not only to aid funded projects but to whole sets of projects. Corroborating macroeconomic findings, their results lead to the same conclusion that more aid should be allocated to more vulnerable countries, in spite of the lower success of the projects in an unstable environment: project evaluations cannot include the macrostabilizing effect of the aid delivered through projects. 2012-06-26T14:29:46Z 2012-06-26T14:29:46Z 2006-10 http://documents.worldbank.org/curated/en/2006/10/7126764/instability-increases-effectiveness-aid-projects http://hdl.handle.net/10986/9017 English en_US Policy Research Working Paper; No. 4034 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 en_US |
| topic |
ADVERSE EFFECTS AID AID ALLOCATION AID FLOWS BANK LOANS BUSINESS CYCLES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT ISSUES DEVELOPMENT OBJECTIVES DEVELOPMENT PROJECTS DEVELOPMENT RESEARCH DONOR AGENCIES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC INSTABILITY ECONOMIC RATE OF RETURN ECONOMIC STABILITY EXPORTS EXTERNALITIES FINANCIAL MARKETS GDP GOVERNMENT EXPENDITURES GROWTH RATE HEALTH STATUS HUMAN CAPITAL INCOME INCOME DISTRIBUTION INCOME GROUPS INCREASING RETURNS INCREASING RETURNS TO SCALE INFLATION INSTITUTIONS INTERNATIONAL AID MACROECONOMIC POLICIES MALNUTRITION POSITIVE EXTERNALITY POVERTY ALLEVIATION POVERTY REDUCTION PRIORITIES PRODUCTIVITY PROJECT EVALUATION PUBLIC FINANCE PUBLIC SERVICES RETURNS TO SCALE RISK AVERSE SELECTION BIAS SIDE EFFECTS SUSTAINABILITY |
| spellingShingle |
ADVERSE EFFECTS AID AID ALLOCATION AID FLOWS BANK LOANS BUSINESS CYCLES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT ISSUES DEVELOPMENT OBJECTIVES DEVELOPMENT PROJECTS DEVELOPMENT RESEARCH DONOR AGENCIES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC INSTABILITY ECONOMIC RATE OF RETURN ECONOMIC STABILITY EXPORTS EXTERNALITIES FINANCIAL MARKETS GDP GOVERNMENT EXPENDITURES GROWTH RATE HEALTH STATUS HUMAN CAPITAL INCOME INCOME DISTRIBUTION INCOME GROUPS INCREASING RETURNS INCREASING RETURNS TO SCALE INFLATION INSTITUTIONS INTERNATIONAL AID MACROECONOMIC POLICIES MALNUTRITION POSITIVE EXTERNALITY POVERTY ALLEVIATION POVERTY REDUCTION PRIORITIES PRODUCTIVITY PROJECT EVALUATION PUBLIC FINANCE PUBLIC SERVICES RETURNS TO SCALE RISK AVERSE SELECTION BIAS SIDE EFFECTS SUSTAINABILITY Guillaumont, Patrick Laajaj, Rachid When Instability Increases the Effectiveness of Aid Projects |
| relation |
Policy Research Working Paper; No. 4034 |
| description |
The authors assess the effect of economic instability on the success of projects funded by the World Bank using the outcome of the projects, which is a notation of their overall success determined by the Bank's Independent Evaluation Group. It has been argued in macroeconomic studies that aid effectiveness is higher in vulnerable countries because it dampens the negative effects of shocks. The authors show that this finding is not inconsistent with the observation that the success of the projects is lower in an unstable environment. Instability, in particular the instability of exports, harms aid projects as it harms the rest of the economy, while the success of projects decreases when the total amount of aid received increases, due to absorptive capacity limitations. But this decrease is slower when instability is higher, showing a positive effect of aid through its stabilizing impact. The authors find the same results keeping only the projects funded by nonconcessionary loans, which suggests that the cushioning effect of aid extends not only to aid funded projects but to whole sets of projects. Corroborating macroeconomic findings, their results lead to the same conclusion that more aid should be allocated to more vulnerable countries, in spite of the lower success of the projects in an unstable environment: project evaluations cannot include the macrostabilizing effect of the aid delivered through projects. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Guillaumont, Patrick Laajaj, Rachid |
| author_facet |
Guillaumont, Patrick Laajaj, Rachid |
| author_sort |
Guillaumont, Patrick |
| title |
When Instability Increases the Effectiveness of Aid Projects |
| title_short |
When Instability Increases the Effectiveness of Aid Projects |
| title_full |
When Instability Increases the Effectiveness of Aid Projects |
| title_fullStr |
When Instability Increases the Effectiveness of Aid Projects |
| title_full_unstemmed |
When Instability Increases the Effectiveness of Aid Projects |
| title_sort |
when instability increases the effectiveness of aid projects |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2006/10/7126764/instability-increases-effectiveness-aid-projects http://hdl.handle.net/10986/9017 |
| _version_ |
1764406502840336384 |