Slide title 70 pt CAPITALS Slide subtitle minimum 30 pt Concentration difficulties: An analysis of Swedish aid proliferation #ebaseminar.

Concentration difficulties: An analysis

of Swedish aid proliferation

#ebaseminar

RUNE JANSEN HAGENUNIVERSITY OF BERGEN

EBA-SEMINAR AUGUST 20 , 2015

Concentration difficulties? An analysis of Swedish aid

proliferation

Overview

BackgroundWhy is aid dispersion a problem?Measuring aid dispersionAid dispersion: The case of SwedenSelectivity in concentrationCoordination vs. Cooperation in aidConclusions

Background

High level (Paris) agenda on aid effectiveness Many sensible ideas Implementation disappointing And new emphasis on development effectiveness, which is

unlikely to improve the recordMajor item on that agenda: aid dispersion too highTwo ways of reducing costs of aid dispersion

Unilateral (e.g. concentration policies of Sweden and others) Simple and lowers costs for both donors and recipients

Joint action: coordination vs. Cooperation Coordination costly and becoming costlier with entry of new

actors

Why is aid dispersion a problem?

Transaction costs Resources absorbed in planning, monitoring, reporting,

and evaluating performance in aid-financed activitiesIncentive problems

Free-riding in provision of collective goods and excessive use of common pool resources

Transaction costs and inefficiencies caused by incentive problems hard to measure

Aid dispersion can be measured and donors have committed to reducing it Fragmentation lowers growth in recipients

Measuring aid dispersion

Many measures in literature, some ad-hocTheil index has well-known propertiesAnd a major advantage: it is decomposable

Total Theil = Between Theil + Within Theil Between Theil: across partner countries Within Theil: across sectors within recipients

Note 1: inequality measure; measures concentration

Note 2: normalised to 0 (lowest) – 1 (highest) Note 3: first time property applied to aid data

Number of recipients

Sweden: Number of recipients up over 2007-2013

Total Theil, Sweden, full sample

2007: Policy change

0

.1

.2

.3

.4

.5

1998 2003 2008 2013Years

Overall Between Within

Source: Author's calculations

Improvement 2007-09 due to between; slippage post 2009; overall no change 07-13

Restricted samples, Sweden

2007: Policy change

0

.1

.2

.3

.4

.5

1998 2003 2008 2013Years



2007: Policy change

0

.1

.2

.3

.4

.5

.6

1998 2003 2008 2013Years



Only large commitments (left),NGOs excluded (below)

Concentration higher, both sub-samples:Small commitments, aid through NGOs more dispersedImprovement 2007-13, due to betweenHigher dispersion after 2009

Selectivity in concentration: the argument

Ineligible due to high incomes

Ineligible due to low institutional quality

Eligible, selected as potential partners because of higher than expected institutional quality

Eligible, but not selected as institutional quality is lower than expected

Estimated relationship between institutional quality and income

Income level Z

X

Inst

itut

iona

l qua

lity

• Institutions matter for long-run development• Policies can ignite growth, but good institutions needed to sustain it• The «right» institutions and policies are country-specific• Different approaches needed in different partner countries• Medium-term, country-specific selectivity using mainly budget support

can incentivise elites, reduce herding, and lower transaction costs

Swedish selectivity 1: Focus countries

0

50

100

Pe

rcen

t

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013


Focus countries Other countries

Swedish selectivity 2: Income & governance

0

50

100

Pe

rcen

t

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013


Low Income Countries Middle Income Countries

0

.1

.2

.3

1998 2003 2008 2013Years


Income (left) and governance (below)

Share of Swedish aid to countries in upper 25percentil of average WGI-indicator

Cooperation vs. coordination

“Coordination is important because so little cooperation takes place. Large numbers of donors, each doing their own thing in developing countries, give rise to a need for coordination to ensure that all of these activities take place in harmony.” Woods (2011, p. 118)

Little evidence of Sweden contributing to an improved division of labour among donors Overlap in activities increasing

Continuous entry of new actors implies coordination costs will increase, arguably making multilateral aid best complement to unilateral action Sweden’s multilateral aid share average as commonly defined

Conclusions

Sweden has made international commitments to reducing aid dispersion and adopted its own concentration policy in 2007

Succeeded 2007-2009, slippage afterwardsOverall dispersion only lower at sample end if

small transactions or NGOs left outOriginal guidelines no tool for achieving

concentration and current aid policy framework does not even mention it

Political economy of aid implies policy should be transparent and institutionalised

Commitments, Sweden

0

500

1000

1500

No

of n

ew c

om

mitm

ents

0

1

2

Ave

rag

e co

mm

itme

ntsi

ze in

US

do

llar

mill

ion

s

1998 2003 2008 2013Years

Commitment size No of new commitments


Commitments, DAC

0

25000

50000

75000

Tot

al n

o of

new

co

mm

itmen

ts

0

1

2

Ave

rag

e co

mm

itme

ntsi

ze in

US

do

llar

mill

ion

s

1998 2003 2008 2013Years

Commitmentsize No of new commitments


Total Theil, Sweden and comparators

0

.2

.4

.6

1998 2003 2008 2013Years

Norway Denmark United KingdomDAC-donors Sweden


Between-component of Theil

0

.1

.2

.3

.4

1998 2003 2008 2013Years



Within-component of Theil

0

.1

.2

.3

.4

1998 2003 2008 2013Years



Number of recipients, large commitments

2007:Policy change

0

50

100

1998 2003 2008 2013Years



Sweden, commitments over 500 000 USD

0

100

200

300

400

No

of n

ew c

om

mitm

ents

0

1

2

3

4

5

Ave

rag

e co

mm

itme

ntsi

ze in

US

do

llar

mill

ion

s

1998 2003 2008 2013Years



Theil, commitments over 500 000 USD

0

.2

.4

.6

1998 2003 2008 2013Years



Number of recipient countries, excluding NGOs

2007:Policy change

0

50

100

150

1998 2003 2008 2013Years



Commitments Sweden, NGOs excluded

0

200

400

600

800

1000

No

of n

ew c

om

mitm

ents

0

1

2

3

4A

vera

ge

com

mitm

ent

size

in U

S d

olla

r m

illio

ns

1998 2003 2008 2013Years



Theil, NGOs excluded

0

.2

.4

.6

1998 2003 2008 2013Years



2007: policy change

Theil Sweden with and w.o. 3 yrs moving average

2007: Policy change

0

.1

.2

.3

.4

.5

1998 2003 2008 2013Years

Overall MA Between MA Within MAOverall Between Within


Overlap in activities among donors

0

.1

.2

1998 2003 2008 2013Years



Average bilateral overlap with other DAC donors: 0 (lowest) – 1 (highest)

Average bilateral overlap for Sweden, 1998-2013

Donor Overlap

Korea 0.016

Japan 0.052

France 0.068

Australia 0.071

Austria 0.086

Spain 0.105

Italy 0.107

Belgium 0.115

Germany 0.128

Denmark 0.142

USA 0.144

Canada 0.144

Switzerland 0.145

United Kingdom 0.150

Ireland 0.164

Finland 0.172

Netherlands 0.206

Norway 0.241

Overlap, commitments over 500 000 USD

0

.1

.2

1998 2003 2008 2013Years



Overlap, excluding NGO-transactions

0

.1

.2

1998 2003 2008 2013Years



Donors included and excluded from sample

Included Excluded (less than 1% of total observations)

Australia Czech Republic

Austria Greece

Belgium Iceland

Canada Luxembourg

Denmark New Zealand

Finland Portugal

France Slovenia

Germany United Arab Emirates

Ireland

Italy

Japan

Korea

Netherlands

Norway

Spain

Sweden

Switzerland

United Kingdom

United States

Sectors in sample

DAC5 code

SectorNumber of

observations110 Education 128,293

120 Health 59,920

130Population policies/programmes and reproductive

health28,622

140 Water and sanitation 29,905

150 Government and civil society 145,768

160 Other social infrastructure and services 64,085

210 Transport and storage 11,929

220 Communications 14,949

230 Energy generation and supply 13,218

240 Banking and financial services 9,472

250 Business and other services 12,009

310 Agriculture, forestry, fishing 64,632

320 Industry, mineral resources and mining, construction 23,302

330Trade policy and regulations and trade-related

adjustment, Tourism11,727

410 General environmental protection 31,025

430 Other multisector 77,124

510 General budget support 1,739

520 Developmental food aid/Food security assistance 20,235

530 Other commodity assistance 436

600 Action relating to debt 4,566

Total 752,956

Sectors excluded from sample

DAC5 code

Sector No of observations

720 VIII.1. Emergency Response 85,727

730 VIII.2. Reconstruction Relief & Rehabilitation 7,931

740 VIII.3. Disaster Prevention & Preparedness 5,070

910 Administrative Costs of Donors 12,297

930 Refugees in Donor Countries 5,654

998 IX. Unallocated / Unspecified 121,954

Theil Formula

Kommentarer

Eva Lithman

Paneldiskussion

Gun-Britt Andersson

Hanna Hellquist

Staffan Herrström

Slide title 70 pt CAPITALS Slide subtitle minimum 30 pt Concentration difficulties: An analysis of Swedish aid proliferation #ebaseminar.

Documents

aid dispersionaid dispersion

pt text

measureaid dispersion

betweenhigher dispersion

pt bullets level

theilbetween theil

decomposabletotal theil

pt slide title