Unpacking the Aid Bundle: A DI Analyst viewpoint


Rob is the author of the Investments to End Poverty chapter 4 which focuses on ‘unpacking the aid bundle’. This blog post explores the motivations behind the research, and take interested data enthusiasts through the methodology used in the report. Click here to read the full report.

I have long been frustrated by the way aid is (mis)counted.  From Dambisa Moyo’s oft-quoted statement that $1 trillion was transferred to Africa over 50 years, to endless academic papers trying to prove that aid spending is (or is not) correlated with economic growth, changes in poverty rates, etc…The source of my frustration is this: the vast majority of this literature treats aid as a homogenous entity – as if it were all in the form of hard cash which was transferred from a donor to recipients

Top-line figures mask important details

Of course, aid is not a homogenous entity – it is an umbrella term for a wide variety of things. Some types of aid do result in the transfer of money. However, the aid figures also include resources transferred in the form of food, or other commodities, or advice and training (technical cooperation).  Obviously these different elements of aid have very different effects on economic development and growth . A dollar of cash will have a very different impact to a dollar’s worth of food or a dollar’s worth of a consultant’s time.  On top of that, aid also includes many elements, such as debt relief, imputed student costs and donors’ administrative spending, which do not result in any transfer of resources to developing nations. Knowing this, how can any economist worth their salt add all these things together:

  • the value of cash (with no distinction between grants and loans),
  • technical cooperation,
  • debt relief,
  • the cost of educating students in donor countries,
  • food (and the shipping costs of food)

…in order to come up with a single number called ‘aid’? And how do they then build on this number to draw conclusions that could impact on the amounts of aid allocated to developing countries?

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Here, at Development Initiatives, we are developing an approach that allows aid to be analysed, not as a single homogenous entity but as a collection of components – what we are calling the ‘aid bundle’.

The ‘Aid Bundle’: Methodology

In order to ’unpack the aid bundle’, we examined each individual record in the OECD’s CRS database of aid activities for the years 2006-2011 (a small matter of 1 million+ rows of data!)  We looked at the aid type, flow code, finance type, purpose code, channel code, technical cooperation marker and recipient code of each record (as well as, in some cases, the project title and description).  Each record was then marked as to whether the disbursement it represented was identifiably in the form of cash, some form of aid in kind, or not transferred.  For just over a fifth of the aid in these records it was not possible to say what proportion of the aid had been in the form of cash and how much was technical cooperation, or other forms of aid in kind.  These records were marked as ‘mixed project aid’  With better data we would be able to split this mixed project aid between the cash, in kind and non-transfer categories and we will be looking at ways of doing this in future.

As a result, we now have a database of aid which can analyse not only analyse aid by donor, by recipient and by sector, we can also look at what form the aid took – how much was actually money (and of that how much was given and how much was lent); how much was technical cooperation and how much stayed within the borders of the donor country.

Some of the results of this analysis are quite striking.  For example, Italy and Denmark both gave very similar levels of bilateral aid in 2011 (just over $2bn).  However almost 70% of Italy’s aid was not transferred to developing countries whereas around 70% of Denmark’s aid did result in a transfer of resources to the developing world.

There are many other things we have been able to do with this data.  To see some of them, take a look at the donor, recipient and sector profiles in section 3 of our new report “Investments to End Poverty”. We hope that our exploration of this data encourages a more informed debate about the real figures on aid- and a move away from comparing the misleading headline figures.

If you have thoughts or questions on the ‘aid bundle’ methodology and research, please do leave your comments below or catch up with the DI team on Twitter @devinitorg.