OECD Development Centre Working Papers
The OECD Development Centre links OECD members with developing and emerging economies and fosters debate and discussion to seek creative policy solutions to emerging global issues and development challenges. This series of working papers is intended to disseminate the OECD Development Centre’s research findings rapidly among specialists in the field concerned. These papers are generally available in the original English or French, with a summary in the other language.
- ISSN: 18151949 (online)
- https://doi.org/10.1787/18151949
Crushed Aid
Fragmentation in Sectoral Aid
This paper measures and compares fragmentation in aid sectors. Past studies focused on
aggregate country data but a sector analysis provides a better picture of fragmentation. We start
by counting the number of aid projects in the developing world and find that, in 2007, more than
90 000 projects were running simultaneously. Project proliferation is on a steep upward trend
and will certainly be reinforced by the emergence of new donors. Developing countries with the
largest numbers of aid projects have more than 2 000 in a single year. In parallel to this boom of
aid projects, there has been a major shift towards social sectors and, as a consequence, these are
the most fragmented. We quantify fragmentation in each aid sector for donors and recipients and
identify which exhibit the highest fragmentation. While fragmentation is usually seen as an issue
when it is excessive, we also show that some countries suffer from too little fragmentation. An
original contribution of this paper is to develop a monopoly index that identifies countries where
a donor enjoys monopoly power. Finally, we characterise countries with high fragmentation
levels. Countries that are poor, democratic and have a large population get more fragmented aid.
However, this is only because poor and democratic countries attract more donors. Once we control for the number of donors in a country-sector, democratic countries do not appear different from non-democratic ones in any sector and poor countries actually have a slightly less
fragmented aid allocation.
Keywords: aid, fragmentation
JEL:
F35: International Economics / International Finance / Foreign Aid
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