4. How effective is development aid? Human stature as a new indicator in a core
4.6 Concluding remarks
The objective of this paper was to find out whether overall well-being in a country is significantly affected by official foreign assistance. We contributed to the growing body of aid effectiveness literature by introducing new proxies for well-being, namely height development and changes in the share of stunted children. Our comprehensive height data set enabled us to include countries and periods for which evidence on other human well-being indicators is often lacking or imprecise. This reduces data selectivity problems. We find that development aid had significantly negative effects on well-being in the short-run during the 1960s to 1970s, while the impact was still negative but not significantly so during later periods.
79 This result is not implausible, as Minoiu and Reddy (2010) found similar effects for GDP growth.
Chapter 4. How effective is development aid? Human stature as a new indicator in a core debate.
107
Table 4.4: Determinants of height growth: long-term effects of average aid flows during the 1960s to 1980s on improved well-being in the 1990s and 2000s
(1) (2) (3) (4) (5)
108
Table 4.5: Determinants of height growth: long-term effects of the total aid flows during the 1960s to 1980s on an improved standard of living in the 1990s and 2000s
(1) (2) (3) (4) (5) statistic, while AR p-val. is the p-value of the Anderson Rubin Chi-squared test.
Chapter 4. How effective is development aid? Human stature as a new indicator in a core debate.
109
In the long run, however, an increase in aid flows is positively related to well-being outcomes, although this effect is mostly insignificant.
We interpret this change from significantly negative impacts in the early period to neutral short-run effects in the later period as a result of counter-acting forces. On the one hand, development aid leads to a phenomenon that is frequently described as “the curse of foreign aid”: transferring resources into a poor country often leads to rent-seeking behaviour. To put it in a nutshell, instead of efficiently investing foreign aid in projects and sectors it was aimed at and thereby enhancing well-being and growth, recipient governments use aid transfers to enrich themselves. On the other hand, foreign aid strategies have improved over time and, furthermore, aid payments became less influenced by power politics: while the political situation during the cold war heavily influenced donors’ behaviour in the early period, aid has become more development-oriented over the years. These improvements in the aid design have apparently counter-acted against the adverse effects resulting, for example, from rent-seeking behaviour.
However, positive effects were not strong enough to provide a significant contribution to the improvement of anthropometric values in the short-run.
In the long-run, the impact of development aid tends to be positive, probably because the effects of investment in education and health are more clearly observable within a larger time frame. However, the effect stays insignificant in most of the specifications and therefore it would be too daring to conclude that aid actually leads to visible effects in a long-run perspective.
The policy implications that we can draw from these results are twofold. First of all, the aid strategies that are followed by donors nowadays, including the shift from project to programme aid, seem to work far better than aid strategies that have been used at the beginning of food aid flows and, therefore, the food aid policies seems to be on a good way. Given that food aid provided since the 1980s has already yielded clearly better short-term results than aid provided in previous decades (or at least adverse effects have been reduced substantially), we can expect that the long-term effects that might not be visible yet are even more promising.
Secondly, the evaluation of the effectiveness of foreign aid should not only be assessed by using indicators of economic prosperity, such as GDP or the growth thereof.
110
It is rather necessary to use a broader definition of well-being and therefore also introduce indicators that measure the biological well-being of recipient countries. To be able to do so, it is necessary to improve the data base on non-monetary indicators of welfare (for poor countries, in particular).
Chapter 4. How effective is development aid? Human stature as a new indicator in a core debate.
111
Appendix C
Table C.1: Countries for which evidence is available in the respective period
1960s to late-1970s 1980s to late 2000s
Benin Albania
Democratic Republic of the Congo Cameroon
Dominican Republic Central African Republic
Egypt Chad
112
Table C.1 (continued)
1960s to late-1970s 1980s to late 2000s
Zambia Indonesia
Chapter 4. How effective is development aid? Human stature as a new indicator in a core debate.
113
Table C.2: Descriptive statistics for the dependent and independent variables Period 60s to late 70s
Notes: Numbers calculated for first two-stage least-squares model of Table 4 and 5 where included variables are non-missing. Aid/GDP minimum values not exactly zero, but very small values below 0.005. Only cases with aid >0 are included in our regressions.
114
Definitions and sources of variables
Aid is defined as the log share of net official development aid disbursements in current U.S. dollars and GDP in current U.S. dollars. Source: OECD DAC 2a data set (aid (ODA) disbursements to countries and regions). Data available at http://stats.oecd.org.
Aid*Pol.rights is an interaction term of aid and the political rights index as calculated by Freedom House. The extent of political rights in a country is coded from 1-7 (7 being the worst), the data is taken from the World Development Report 2011.
Av. Aid6080 is the average flow of Aid/GDP (in logs) to a recipient country from 1960 to 1989.
Centam is a dummy variable that is equal to one if country i is located in Central America and zero otherwise.
Change in stunting (short dht) is the dependent variable for the later period. It is calculated as the percentage change of non-stunted children from period t to period t+1: non-stuntedt=1- non-stuntedt=0.
Intra-state war is coded as a dichotomous variable adopting the value 1 if an intra-state war took place in given country and period. Intra-state wars are wars that are fought within state borders and include wars between non-government forces and a government (civil war) as well as wars between two non-government forces. Sources: Correlates of War Project: http://www.correlatesofwar.org/
Democracy indicates the openness of democratic institutions in a country and is measured on a scale of 0 (low) to 20 (high). The original scale from the Polity IV project ranges from -10 to +10. Source: Polity IV Project, http://www.systemicpeace.org/polity/polity4.htm.
Egypt is a dummy variable equal to 1 if the country is Egypt and zero otherwise.
Chapter 4. How effective is development aid? Human stature as a new indicator in a core debate.
115
Ethnic fractionalisation: based on a combination of racial and linguistic characteristics and defined as 1 minus the Herfindahl index of group shares of these characteristics. Source: Alesina et al. (2003). Data available at http://www.nsd.uib.no/macrodataguide/set.html?id=16&sub=1.
GDP p.c. is the average GDP per capita in period t. The data was extracted from the World Bank, http://data.worldbank.org/indicator.
Height describes the average adult male height in the country; measured in centimetres.
Sources: Baten and Blum (2012), Measure DHS (Demographic and Health Surveys) project and the World Health Organisation’s (WHO) Global Database on Child Growth and Malnutrition.
Height growth or Ght if the abbreviation is used (dependent variable for early period) is the growth rate of heights between two decades:
[(heightt+1 –heightt) / height t]*100
Human Development Index or hdi is a composite measure of health, education and income. It is an alternative measure of economic progress and was first introduced in the Human Development Report 1990. The data was extracted from the United Nations Development Programme homepage, http://hdrstats.undp.org/en/indicators/103106.html (last access: October 17th, 2013).
Initial GDP p.c. is the per capita GDP (in logs) at the beginning of period t.
Initial height is the average height of the population in country i in t=0.
Initial non-stunted is the fraction of children in country i that were not stunted in t=0.
Stunted are children with heights of more than two standard deviations below the mean.
116
Openness is a variable that ranges between 0 and 1, with 1 being a country with open
trade. Source: Sachs and Warner,
http://www.cid.harvard.edu/ciddata/ciddata.html.
Physicians is defined as the number of physicians per 1,000 people. Physicians include generalist and specialist medical practitioners. Source: World Bank, http://data.worldbank.org/indicator.
Population (log) is the log of a country’s population at the beginning of a ten-year period. Sources: The World Bank and Maddison (2001).
SSA is a dummy variable that is 1 if a country is located in Sub-Saharan Africa and 0 otherwise.
Sum aid6080 is the sum of all flows of Aid/GDP (in logs) to a recipient country from 1960 to 1989.
Chapter 5. Does food aid improve child nutrition? An anthropometric assessment of