Rethinking Development Effectiveness

This article reviews some recent research on aid effectiveness. An important finding of this research is that foreign aid has been much more effective than is generally presumed. It also suggests that the current aid allocation policy of development agencies, based on selectivity, has a fragile empirical foundation and discriminates against capacity-constrained/geographically disadvantaged countries. To achieve international development objectives, the fundamental basis for foreign aid allocation should be the Millennium Development Goals and national poverty reduction strategies—a bottom-up approach, as contrasted from the top-down method currently being practiced.