Aid Effectiveness and Aid Allocation
Despite great progress in poverty reduction over the past 20 years, over one billion people still live in extreme poverty. Thus, a continuing debate on making aid more effective and using limited resources wisely is imperative. Whereas an extensive macro-economic as well as micro-economic literature on the impact of development aid on poverty reduction exists, little is known about the relevance of aid effectiveness for private and public donors when making.
In a first project and in collaboration with the evaluation department of the German Development Bank (KfW), we study the drivers of evaluation ratings for drinking water projects. More precisely, the study compares KfW’s ex post evaluation ratings, in particular effectiveness ratings, to more clear-cut performance indicators based on safe water supply, such as per capita consumption and number of people with access to safe water sources.
In a second project, we study to what extent private donors value information about the welfare impact of their donation when deciding which NGOs to support and how much to donate. Individual donors finance a considerable and increasing share of foreign aid and can achieve a positive welfare impact by supporting effective policy interventions for the poor. We already conducted a donation experiment in the laboratory to investigate whether individuals are interested in the impact of their potential donation before donating money to a real Swiss charity. Moreover, since it is often questioned whether findings from the lab can be generalized to the broader population, to cross-validate our laboratory data we are currently designing a field experiment with an international NGO.
Partner: German Development Bank
Award: The project was awarded with the Prix Seval 2016