One Response

  1. Terence Wood
    Terence Wood July 20, 2011 at 9:42 am

    Hi Satish,

    Thank you for an interesting blog post. And for what promises to be an interesting paper. I look forwards to reading it once I’m back in Canberra.

    At this point I just want to highlight what appears to be a minor shortcoming of your work – something that is common to a lot of papers that examine the determinants of aid allocation.

    This is that you appear to have (and please correct me if I’m wrong) regressed total aid to a country (the dependent variable) against quality of governance (one of the independent variables). Yet, I would argue that the more appropriate comparison is total aid delivered to the government of a country (DV) vs quality of governance (Indep Var). I suggest this because there is a strong correlation between poor governance and poverty. Meaning that from a poverty targeting perspective it makes sense to give aid to poorly governed countries, even while we might doubt the wisdom of giving aid to the governments of these countries.

    When Sarah Bermeo undertook an exercise disaggregating aid into flows to governments and flows delivered outside governments she found that, on average, donors did actually give less aid to the governments of poorly governed countries, often compensating for this by giving more aid to NGOs etc. She also found that this strategy paid dividends in terms of poverty reduction. Her working paper is here:
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1681104

    cheers

    Terence

Leave a Reply