Why aid is unpredictable: An empirical analysis of the gap between actual and planned aid flows

Gustavo Canavire-Bacarreza, Eric Neumayer and Peter Nunnenkamp

No 1933, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Aid flows continue to be volatile and unpredictable, even though it is widely accepted that this erodes the effectiveness of foreign aid. We argue that fragmented donor-recipient relationships, notably the large number of minor aid relations that tend to be associated with donors' desire to have 'fly their flag' around the world, increase aid unpredictability. Our empirical analysis of the determinants of aid unpredictability suggests that aid becomes less predictable with more fragmented donor-recipient relationships. Specifically, the effect of fragmentation on overshooting previous spending plans is statistically highly significant and substantively important. In contrast, fragmented donor-recipient relationships have no effect on the shortfall of actual aid compared to donors' spending plans.

Keywords: aid predictability; donor fragmentation; forward spending plans (search for similar items in EconPapers)
JEL-codes: F35 (search for similar items in EconPapers)
Date: 2014
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https://www.econstor.eu/bitstream/10419/98410/1/789083655.pdf (application/pdf)

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Journal Article: Why Aid is Unpredictable: An Empirical Analysis of the Gap Between Actual and Planned Aid Flows (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1933

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