Development Policy Centre Discussion Paper 108
In this paper we test whether increasing the independence of the project appraisal process changes the reported effectiveness of aid projects. We do this using a dataset of Australian aid appraisals and a natural experiment, which occurred when a more independent process involving DFAT’s central evaluation unit and external contractors was implemented for the review of performance appraisals of completed projects. Using difference-in-differences and contrasting assessments of ongoing projects, which the appraisal process was not changed for, and completed projects, where the process was changed, we show that introducing a more independence led to a substantial fall in how successful projects were deemed to be. We also show that the change probably led to more accurate recording of COVID-19’s impact on Australian aid, as well as more accurate assessments of the quality of Australia’s aid to Papua New Guinea, its largest aid partner. As we do this, we take care to demonstrate that our findings are robust to the types of methodological issues that can afflict difference-in-differences studies.
