Comments on
"Foreign Aid Effectiveness And
Selectivity: New Results"
The Massachusetts Avenue
Development Seminar (MADS)
Center for Global Development
Washington, DC
April 13, 2004
Nicholas Eberstadt
Henry Wendt Chair in Political Economy
American Enterprise Institute
<eberstadt@aei.org>
“Selectivity” and Aid, 1984-2002
There are indeed indications that the
relationship between aid absorption
and local policy climate in lowincome areas has been changing
somewhat over time—although not
necessarily in the expected
directions…
ODA as Percent GNI vs.
Economic Freedom Rating, 1985
ODA as Percent
GNI
1985
Linear
(1985)
40
30
y = -1.0891x + 11.314
(-1.49)
(3.01)
20
2
R = 0.0426
n = 50
10
0
0
5
10
Economic Freedom Rating
Sources:
The World Bank, World Development Indicators 2003 CD-ROM
Gwartney, James and Robert Lawson, Economic Freedom of the World: 2003 Annual Report
ODA as Percent GNI
ODA as Percent GNI vs.
Economic Freedom Rating, 2001
50
2001
40
Linear
(2001)
30
y = -3.0479x + 24.24
(-2.52) (3.32)
20
R = 0.1076
n = 55
2
10
0
0
5
10
Economic Freedom Rating
Sources:
The World Bank, World Development Indicators 2003 CD-ROM
Gwartney, James and Robert Lawson, Economic Freedom of the World: 2003 Annual Report
The Fraser Institute, 2003.
Beyond Policy Climate:
Other Possible Criteria and Attendant Indicators For
Measuring Aid Effectiveness
• Economic Performance [per capita output, per
capita exports]
• Living Standards [per capita output, life
expectancy]
• Structural Aid Dependence [ODA/GNI,
ODA/exports, ODA/imports, ODA/FDI]
• Admittedly crude indicators—but relatively
reliable data (cf. international poverty lines, etc.)
Disaggregating Performance By Region,
1984-2002
• “Low and Middle Income Countries”: World Bank
Designation for All Developing Regions
• East Asia
• South Asia
• Latin America and the Caribbean
• Middle East
• Sub-Saharan Africa
• Also, two “special cases” of highly “political” aid: Israel
and the Russian Federation
GDP Per Capita, 1984-2002
Relatively Successful Economies
East Asia &
Pacific
Israel
10000
Latin America &
Caribbean
1000
Low & middle
income
South Asia
Year
Note: Constant 1995 US Dollars
Source: The World Bank, World Development Indicators 2003 CD-ROM
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
100
1984
GDP Per Capita
100000
GDP Per Capita, 1984-2002
Less Successful Economies
3000
2500
Middle East
2000
Russia
1500
Sub-Saharan Africa
1000
500
Year
Note: Constant 1995 US Dollars
Source: The World Bank, World Development Indicators 2003 CD-ROM
02
20
00
20
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
0
19
GDP Per Capita
3500
Net ODA, 2002 Dollars
Relatively Successful Economies
100000
East Asia
Net ODA
Israel
10000
Latin
America/Caribbean
1000
Low Middle Income
South Asia
02
20
00
20
98
19
96
19
94
19
92
19
90
19
88
19
86
19
19
84
100
Year
Note: Series adjusted to 2002 US Dollars by PPI deflator
Sources: OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002
(Paris :OECD, 2004); idem., International Development Statistics, 2002. CD-ROM
Net ODA, 2002 Dollars
Less Successful Economies
Middle East
25000
Russia
Net ODA
20000
Sub-Saharan Africa
15000
10000
5000
02
20
00
20
98
19
96
19
94
19
92
19
90
19
88
19
86
19
19
84
0
Year
Note: Series adjusted to 2002 US Dollars by PPI deflator
Sources: OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002
(Paris :OECD, 2004); idem., International Development Statistics, 2002. CD-ROM
Exports Per Capita, 2002 Dollars
Relatively Successful Economies
East Asia & Pacific
Exports per Capita, 1984-2001
Low & middle income
South Asia
1000
Latin America &
Caribbean
Israel
100
02
20
00
20
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
10
19
Exports Per Capita
10000
Year
Source: The World Bank, World Development Indicators 2003. CD-ROM
900
800
700
600
500
400
300
200
100
0
Middle East
Russia
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
Sub-Saharan Africa
19
86
19
84
Exports Per Capita
Exports Per Capita, 2002 Dollars
Less Successful Economies
Year
Source: The World Bank, World Development Indicators 2003. CD-ROM
East Asia
25%
20%
Israel
15%
Latin America
& Carib
Low Middle
Income
South Asia
10%
5%
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
0%
19
84
Percentage of Exports
ODA as a Percentage of Exports,
Relatively Successful Economies
Year
Sources:
OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002 (Paris: OECD, 2004)
The World Bank, World Development Indicators 2003. CD-ROM
30%
25%
Middle East
20%
Russia
15%
Sub-Saharan
Africa
10%
5%
02
20
00
20
98
19
96
19
94
19
92
19
90
19
88
19
19
19
86
0%
84
Percentage of Exports
ODA as a Percentage of Exports
Less Successful Economies
Year
Sources:
OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002 (Paris: OECD, 2004)
OECD, International Development Statistics, 2002. CD-ROM
The World Bank, World Development Indicators 2003. CD-ROM
East Asia &
Pacific
20
Israel
15
Latin America &
Caribbean
10
5
Low & middle
income
0
South Asia
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
Percentage of Imports
ODA as Percentage of Imports
Relatively Successful Economies
Year
Source: The World Bank, World Development Indicators 2003. CD-ROM
ODA as a Percentage of Imports
Less Successful Economies
Middle East
Russia
20
Sub-Saharan
Africa
15
10
5
02
20
00
20
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
0
19
Percentage of Imports
25
Year
Source: The World Bank, World Development Indicators 2003. CD-ROM
FDI as a Percentage of ODA
Relatively Successful Economies
FDI as Percentage of ODA, 1984-2001
East Asia &
Pacific
Percentage of ODA
2000%
Israel
1500%
Latin America &
Carib
1000%
Low Middle
Income
500%
South Asia
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
0%
Year
Sources:
OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002 (Paris: OECD, 2004)
OECD, International Development Statistics, 2002. CD-ROM
The World Bank, World Development Indicators 2003. CD-ROM
380%
280%
Middle East
180%
Russia
Sub-Saharan Africa
80%
-20%
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
Percentage of ODA
FDI as a Percentage of ODA
Less Successful Economies
Year
Sources:
OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002 (Paris: OECD, 2004)
OECD, International Development Statistics, 2002. CD-ROM
The World Bank, World Development Indicators 2003. CD-ROM
Performance Indicators for
Developing World and by Region
1984 versus 2002
(regions listed in descending order of
overall performance)
Low/Middle Income Countries
GDP Per Capita (1995 $)
Life Expectancy at Birth
c. 1984
972
62
c. 2002
1279
65
Per Capita Exports (2002 $)
ODA as a Percentage of GNI
185
1.0%
352
0.9%
ODA as a Percentage of Exports
5.6%
1.7%
ODA as a Percentage of Imports
4.5%
2.9%
FDI as a Percentage of ODA
47%
279%
Average Economic Freedom Rating
Total ODA 1984-2002 (2002 $)
4.6
1.2 trillion
6.1
Sources:
OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002 (Paris: OECD, 2004)
OECD, International Development Statistics, 2002. CD-ROM
The World Bank, World Development Indicators 2003. CD-ROM
Gwartney, James and Robert Lawson, Economic Freedom of the World: 2003 Annual Report
The Fraser Institute, 2003.
East Asia & Pacific
GDP Per Capita (1995 $)
Life Expectancy at Birth
c. 1984
367
66
c. 2002
1048
69
Per Capita Exports (2002 $)
ODA as a Percentage of GNI
81
0.7%
332
0.5%
ODA as a Percentage of Exports
3.3%
1.1%
ODA as a Percentage of Imports
3.7%
1.2%
FDI as a Percentage of ODA
99%
751%
Average Economic Freedom Rating
6.1
6.8
Total ODA 1984-2002 (2002 $)
141 billion
Sources:
OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002 (Paris: OECD, 2004)
OECD, International Development Statistics, 2002. CD-ROM
The World Bank, World Development Indicators 2003. CD-ROM
Gwartney, James and Robert Lawson, Economic Freedom of the World: 2003 Annual Report
The Fraser Institute, 2003.
South Asia
GDP Per Capita (1995 $)
Life Expectancy at Birth
c. 1984
270
56
c. 2002
486
63
Per Capita Exports (2002 $)
ODA as a Percentage of GNI
28
1.5%
66
1.0%
ODA as a Percentage of Exports
21.9%
9.4%
ODA as a Percentage of Imports
13.1%
5.1%
FDI as a Percentage of ODA
2%
47%
Average Economic Freedom Rating
Total ODA 1984-2002 (2002 $)
4.6
5.8
139 billion
Sources:
OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002 (Paris: OECD, 2004)
OECD, International Development Statistics, 2002. CD-ROM
The World Bank, World Development Indicators 2003. CD-ROM
Gwartney, James and Robert Lawson, Economic Freedom of the World: 2003 Annual Report
The Fraser Institute, 2003.
Israel
GDP Per Capita (1995 $)
Life Expectancy at Birth
c. 1992
14,259
76
c. 2002
17,068
79
Per Capita Exports (2002 $)
ODA as a Percentage of GNI
4383
3.2%
6611
0.8%
ODA as a Percentage of Exports
10.6%
1.9%
ODA as a Percentage of Imports
7.5%
0.3%
FDI as a Percentage of ODA
29%
428%
Economic Freedom Rating
Total ODA 1984-2002 (2002 $)
4.2
29 billion
6.5
Sources:
OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002 (Paris: OECD, 2004)
OECD, International Development Statistics, 2002. CD-ROM
The World Bank, World Development Indicators 2003. CD-ROM
Gwartney, James and Robert Lawson, Economic Freedom of the World: 2003 Annual Report
The Fraser Institute, 2003.
Latin America & the Caribbean
GDP Per Capita (1995 $)
Life Expectancy at Birth
c. 1984
3391
66
c. 2002
4052
71
Per Capita Exports (2002 $)
ODA as a Percentage of GNI
423
0.5%
771
0.3%
ODA as a Percentage of Exports
2.1%
1.3%
ODA as a Percentage of Imports
2.1%
1.2%
FDI as a Percentage of ODA
162%
1356%
Average Economic Freedom Rating 4.3
Total ODA 1984-2002 (2002 $)
101 billion
Sources:
6.4
OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002 (Paris: OECD, 2004)
OECD, International Development Statistics, 2002. CD-ROM
The World Bank, World Development Indicators 2003. CD-ROM
Gwartney, James and Robert Lawson, Economic Freedom of the World: 2003 Annual Report
The Fraser Institute, 2003.
Middle East
GDP Per Capita (1995 $)
Life Expectancy at Birth
c. 1984
1843
62
c. 2002
1988
69
Per Capita Exports (2002 $)
ODA as a Percentage of GNI
728
N/A
672
0.7%
ODA as a Percentage of Exports
3.3%
1.7%
ODA as a Percentage of Imports
3.0%
2.7%
FDI as a Percentage of ODA
172%
164%
Average Economic Freedom Rating
Total ODA 1984-2002 (2002 $)
5.2
74 billion
6.3
Sources:
OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002 (Paris: OECD, 2004)
OECD, International Development Statistics, 2002. CD-ROM
The World Bank, World Development Indicators 2003. CD-ROM
Gwartney, James and Robert Lawson, Economic Freedom of the World: 2003 Annual Report
The Fraser Institute, 2003.
Russia
GDP Per Capita (1995 $)
c. 1992
2967
c. 2002
2609
Life Expectancy at Birth
67
66
Per Capita Exports (2002 $)
570
776
ODA as a Percentage of GNI
ODA as a Percentage of Exports
ODA as a Percentage of Imports
FDI as a Percentage of ODA
0.5%
6.2%
2.6%
15%
0.4%
1.2%
1.3%
190%
Economic Freedom Rating
Total ODA 1992-2002 (2002 $)
4.1
50 billion
5.0
Sources:
OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002 (Paris: OECD, 2004)
OECD, International Development Statistics, 2002. CD-ROM
The World Bank, World Development Indicators 2003. CD-ROM
Gwartney, James and Robert Lawson, Economic Freedom of the World: 2003 Annual Report
The Fraser Institute, 2003.
Sub-Saharan Africa
GDP Per Capita (1995 $)
Life Expectancy at Birth
c. 1984
621
49
c. 2002
575
46
Per Capita Exports (2002 $)
ODA as a Percentage of GNI
188
4.9%
168
4.6%
ODA as a Percentage of Exports
12.9%
16.4%
ODA as a Percentage of Imports
12.2%
11.0%
FDI as a Percentage of ODA
13%
74%
Average Economic Freedom Rating
Total ODA 1984-2002 (2002 $)
4.5
5.7
319 billion
Sources:
OECD, Geographical Distribution of Financial Flows of Aid to Recipients 1988-2002 (Paris: OECD, 2004)
OECD, International Development Statistics, 2002. CD-ROM
The World Bank, World Development Indicators 2003. CD-ROM
Gwartney, James and Robert Lawson, Economic Freedom of the World: 2003 Annual Report
The Fraser Institute, 2003.
Preliminary Conclusions
•
•
•
•
•
•
Did the policy climate in recipient low-income areas improve between 1984
and 2002? Very clearly, yes—improvement was marked and general.
Did aid “selectivity” and aid “effectiveness” contribute positively to this
outcome? The answer to this question is not at all self-evident.
For low-income, aid-receiving areas as a whole, trends were generally positive
for economic performance (up), living standards (up), and structural aid
dependence (down).
But performance “story lines” varied tremendously between regions—with the
most heavily aid-dependent areas characterized by measured stagnation, or
retrogression, in economic performance and living standards.
How to explain the striking negative association among regions between high
aid levels and poor trends in economic performance and living standards:
Measurement error? “Neighborhood effects”? Independent influence of
structural aid dependence? Some combination? Other factors?
Perhaps surprisingly, markedly different performance records for highly
“political” aid in different settings: the “story line” for Russia looks rather
disappointing, while the “story line” appears more promising.