Do Performance Measures of Donors’ Aid Allocation Underperform?

2015, The World Economy, 38(5): 805–824

Abstract: Indices of donor performance abound. Their recent popularity has occurred within the context of pessimism over aid’s impact and optimism over the effect of changes in donor behaviour. Rankings of donor allocative performance aim to change donor behaviour, either through direct pressure on governments or indirectly through public engagement. The indices themselves rely on descriptive measures, and typically claim methodological superiority over positive alternatives due to their simplicity. However, there are two problems. First, measures do not seem robust to simple variations in methodology. Second, correlation amongst competing indices is low, leading to a host of contradictory judgements. This offers neither clear technical guidance nor consistent political pressure. The advantages and disadvantages of the approach are discussed, building upon the more general critique of aggregate indices. I suggest a graphical solution that embraces the advantages of the descriptive approach (including ease of public communication) while avoiding some of its major weaknesses (which typically stem from aggregation).