1. Effects of Aid on Recipients: Sectoral Approach
International Development Cooperation:
Theory & Practice
SNU GSIS
Effects of Aid on Recipients: Sectoral Approach

2. Does Aid Work? The objectives of ODA
From the OECD definition, ODA should be designed to promote economic development and welfare as their main objectives
to stimulate economic growth through building infrastructure, supporting productive sectors such as agriculture, or bringing new ideas and technologies,
to strengthen education, health, environmental, or political systems,
to support subsistence consumption of food and other commodities, especially during relief operations or humanitarian crises,
to help stabilize an economy following economic shocks.

3. The purpose of most aid is to improve the living standards of people in developing countries
by contributing to key services, such as education, health, water and sanitation
Aid for this purpose can possibly strengthen economic performance in the long run, but is not likely to lead to faster economic growth in the short or medium term.

4. Does aid work? Does aid lead to economic growth?
Yes vs No
In some circumstances
With diminishing returns
Most studies on aid effectiveness focus on its macroeconomic impact, on the country as a whole, with mixed results and methodological criticisms
Does aid improve living standards in developing countries?
Aid is working everyday! (Barder 2011)
The quality of life in developing countries has improved appreciable over last fifty years, and aid has contributed significantly to this gain.
For example, 80% of the world children now get basic vaccinations, over half of which in low-income countries are financed by foreign aid
Surprisingly much less research conducted on its impact on social indicators

5. Aid, Social Development and Growth
Interactions and trade-offs

6. Different Perspectives on Aid effectiveness
Aid objectives and effectiveness
Objectives evolved from industrialization programs in 1950s to recent poverty-reducing objectives such as MDGs
Need to examine whether aid flows have a positive impact on human development
Effectiveness of aid can be judged by
Sustained economic growth, resulting in permanent improvements in living standards
A better quality of life for people in developing countries
The alleviation of suffering
Effectiveness of sector-specific aid
Need to disaggregate aid by specific objective
Sector-specific indicators reflecting the objectives

7. Measuring effectiveness of sector-specific aid
Aid objectives and indicators
Education Sector
Health Sector
Objectives (in MDGs)
Achieve universal primary education
Reduce child mortality
Improve maternal health
Combat HIV/AIDS, malaria and other diseases
Indicators
Enrollment rate
Completion rate
Failure or repetition rates
Pupil-teacher ratio
Test scores …
Life expectancy
Infant mortality rate
Maternal mortality rate
HIV/AIDS rate
Immunizations
Other factors contributing to objectives
Government expenditure
Household poverty level
Educational status of parents
Urbanization
Institutions

8. Effectiveness of aid for education
Empirical analysis by Dreher, et al (2008)
High per capita aid increases primary school enrollment, while domestic government spending on education dose not.

9. Effectiveness of aid for health
Empirical analyses: conflicting results
Williamson (2008)
Mishra and Newhouse (2007)
( )

10. Limitations of measuring sectoral aid effectiveness
Implications
Limitations of measuring sectoral aid effectiveness
regression model specification
data availability
CRS sector-specific data is only available after 1990
multi-sector aid, budget support
limited indicators
Evaluations of aid effectiveness
micro-level investigation
impact evaluations

11. Q & A