"Aid effectiveness in fragile states: an overview of research"
Over the past decade, fragile states has become a resonant term in the development lexicon. Among other reasons, external assistance to these countries has been justified by their lagging performance in achieving development outcomes and the threats they impose to global security and stability. Still, fragile states impose a dilemma. Although they are in great need of development assistance, aid towards these countries is expected to be less effective. This is the starting point of this research, which contributes to the understanding of the effect of foreign aid on economic development in fragile states, using political economy theory and standard econometric techniques.
This seminar will briefly present three papers. The first paper suggests an alternative measurement approach to state fragility that draws on a sound theoretical model and uses principal component analysis to derive an index for two core dimensions: state ineffectiveness and political violence. The second paper contributes to the quantitative studies examining the fragility-growth link by using these two indices as proxies for fragility and considering the effects of distinct dimensions separately. Using data for the period 1993-2012, the results from regression analysis show distinct effects for each dimension and find no significant impact of fragility on growth when employing a single index. Finally, inspired by the empirical aid effectiveness literature, the third paper tests the proposition that aid is less effective in promoting growth in countries with higher levels of state ineffectiveness or political violence. The results show no support for this hypothesis.
Contact person: Neda Trifkovic