Do donors get what they paid for? micro evidence on the fungibility of development project aid

Dominique van de Walle and Dorothyjean Cratty

No 3542, Policy Research Working Paper Series from The World Bank

Abstract: Recipient government responses to development project aid have typically been studied at high levels of aggregation, using cross-country comparisons and/or aggregate time series data. Yet increasingly the relevant decisions are being made at the local level, in response to specific community-level projects. The authors use local-level data to test for fungibility of World Bank financing of rural road rehabilitation targeted to specific geographic areas of Vietnam. A simple double difference estimate suggests that the project's net contribution to rehabilitated road increments is close to zero, suggesting complete displacement of funding. However, with better controls for the endogeneity of project placement the authors find much less evidence of fungibility, with displacement accounting for around one-third of the aid. The results point to the importance ofdealing with selection bias in assessing project aid fungibility.

Keywords: Housing&Human Habitats; Roads&Highways; ICT Policy and Strategies; Health Economics&Finance; Poverty Monitoring&Analysis (search for similar items in EconPapers)
Date: 2005-03-01
New Economics Papers: this item is included in nep-afr, nep-dev and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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