Turning the paradigm of aid allocation on its head

Olivier Sterck, Max Roser and Stefan Thewissen

No 2017-03, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

Abstract: How should aid be allocated among countries? Past research efforts to answer this question followed three steps: (1) the definition of an objective function; (2) the characterization of its functional form; and (3) the estimation of its parameters. Each step has been heavily criticized. While thought provoking, all attempts to refine the objective function and its functional form have increased complexity, overburdening the already too fragile parameterization step. We argue that a complete rethinking and reversal of this paradigm is needed. We start by examining what can be estimated with “sufficient” credibility. We then define five key properties or axioms which are justified in terms of fairness, proportionality, and encouragement domestic investments. Finally, we combine these elements into an allocation formula. The framework is applied to the allocation of development assistance for health

Date: 2017
New Economics Papers: this item is included in nep-dev and nep-ppm
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