The Value Added of Aid Projects

About this event

Aid effectiveness depends on the inputs of recipient countries and donor agencies in executing development projects. Joining the World Bank Project Database with detailed manager information, I quantify countries and managers' project contribution through the Value-Added approach. These estimates show that cross-country and cross-manager variations produce approximately the same performance impact. In order to improve aid effectiveness, I evaluate: 1) a “big reform”, which increases average project success by replacing the 10% worst-performing countries or managers with their respective means; 2) a “small reform”, which affects project success variability by modifying the manager-country assignment rule. Excluding countries increases the average success of treated projects by 39% and the overall economic returns generated by the World Bank of 778 billion dollars, equivalent to a 20% increase relative to the observed figure. Firing managers produces a lower result: 32% more successful projects and 173 additional billion dollars of economic gains, a 4% relative increase. Alternative country-manager assignment criteria affect the standard deviation of project success by 18%-27%.