Publication: Fungibility and the Flypaper Effect of Project Aid : Micro-Evidence for Vietnam
Loading...
Published
2007-02
ISSN
Date
2012-06-05
Author(s)
Editor(s)
Abstract
While most economists assume that aid is fungible, most aid donors behave as if it is not. The authors study recipient government responses to development project aid in the context of a specific World Bank-financed project. They estimate the impact of a rural road rehabilitation project in Vietnam on the kilometers of roads actually rehabilitated and built. Using local-level survey data collected for this purpose, the authors test whether the evidence supports the standard economic argument that there will be little or no impact on rural roads rehabilitated, given fungibility. They find evidence that, although project aid impacts on rehabilitated road kilometers were less than intended, more roads were built in project areas. The results suggest that there was fungibility within the sector, but that aid largely stuck to that sector.
Link to Data Set
Citation
“van de Walle, Dominique; Mu, Ren. 2007. Fungibility and the Flypaper Effect of Project Aid : Micro-Evidence for Vietnam. Policy Research Working Paper; No. 4133. © World Bank. http://hdl.handle.net/10986/7167 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Publication The Economic Value of Weather Forecasts: A Quantitative Systematic Literature Review(Washington, DC: World Bank, 2025-09-10)This study systematically reviews the literature that quantifies the economic benefits of weather observations and forecasts in four weather-dependent economic sectors: agriculture, energy, transport, and disaster-risk management. The review covers 175 peer-reviewed journal articles and 15 policy reports. Findings show that the literature is concentrated in high-income countries and most studies use theoretical models, followed by observational and then experimental research designs. Forecast horizons studied, meteorological variables and services, and monetization techniques vary markedly by sector. Estimated benefits even within specific subsectors span several orders of magnitude and broad uncertainty ranges. An econometric meta-analysis suggests that theoretical studies and studies in richer countries tend to report significantly larger values. Barriers that hinder value realization are identified on both the provider and user sides, with inadequate relevance, weak dissemination, and limited ability to act recurring across sectors. Policy reports rely heavily on back-of-the-envelope or recursive benefit-transfer estimates, rather than on the methods and results of the peer-reviewed literature, revealing a science-to-policy gap. These findings suggest substantial socioeconomic potential of hydrometeorological services around the world, but also knowledge gaps that require more valuation studies focusing on low- and middle-income countries, addressing provider- and user-side barriers and employing rigorous empirical valuation methods to complement and validate theoretical models.Publication Direct and Indirect Impacts of Transport Mobility on Access to Jobs: Evidence from South Africa(Washington, DC: World Bank, 2025-11-12)Access to jobs is essential for economic growth. In Africa, unemployment rates are notably high. This paper reexamines the relationship between transport mobility and labor market outcomes, with a particular focus on the direct and indirect effects of transport connectivity. As predicted by theory, wages are influenced by the level of commuting deterrence. Generally, higher earnings are associated with longer commute times and/or higher commuting costs. Local accessibility is also important, especially for individuals with time constraints. Both direct and indirect impacts are found to be significant in South Africa, where job accessibility has been challenging since the end of apartheid. For the direct impact, the wage elasticity associated with commuting costs is significant. Returns on commute are particularly high for women. Local accessibility to socioeconomic facilities, such as shops and health services, is also found to have a significant impact, consistent with the concept of mobility of care. To enhance employment, therefore, it is crucial to connect people not only to job locations but also to various socioeconomic points of interest, such as markets and hospitals, in an integrated manner. This integration will enable individuals to spend more time working and commuting longer distances.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication From Policy to Practice: Lessons from the Implementation of the Refugee Work Rights Policy in Ethiopia(Washington, DC: World Bank, 2025-11-10)This paper examines the early implementation of Ethiopia’s refugee work rights policy, with a focus on the issuance of permits that enable refugees to engage in economic activities. Building on significant legal and institutional advances under the 2019 Refugee Proclamation and subsequent directives, the analysis explores how these reforms are being operationalized in practice. Using a mixed-methods approach, combining document review, administrative data analysis, and semi-structured interviews, the paper identifies both progress and remaining challenges. Permit issuance has increased since the adoption of detailed operational guidance in 2024, reflecting the Government of Ethiopia’s commitment to operationalizing its progressive legal framework and ensuring that refugees can exercise their right to work. However, take-up remains modest, with about 5.2 percent of the working-age population holding a permit. Preliminary evidence suggests that coordination gaps, limited subnational capacity, low awareness among refugees and employers, and disincentives to formalize in a largely informal labor market are contributing to the low take-up. The paper offers policy suggestions, grounded in the Ethiopian context and emerging evidence, to help translate legal commitments into improved labor market outcomes for refugees.Publication Monitoring Global Aid Flows: A Novel Approach Using Large Language Models(Washington, DC: World Bank, 2025-11-04)Effective monitoring of development aid is the foundation for assessing the alignment of flows with their intended development objectives. Existing reporting systems, such as the Organisation for Economic Co-operation and Development’s Creditor Reporting System, provide standardized classification of aid activities but have limitations when it comes to capturing new areas like climate change, digitalization, and other cross-cutting themes. This paper proposes a bottom-up, unsupervised machine learning framework that leverages textual descriptions of aid projects to generate highly granular activity clusters. Using the 2021 Creditor Reporting System data set of nearly 400,000 records, the model produces 841 clusters, which are then grouped into 80 subsectors. These clusters reveal 36 emerging aid areas not tracked in the current Creditor Reporting System taxonomy, allow unpacking of “multi-sectoral” and “sector not specified” classifications, and enable estimation of flows to new themes, including World Bank Global Challenge Programs, International Development Association–20 Special Themes, and Cross-Cutting Issues. Validation against both Creditor Reporting System benchmarks and International Development Association commitment data demonstrates robustness. This approach illustrates how machine learning and the new advances in large language models can enhance the monitoring of global aid flows and inform future improvements in aid classification and reporting. It offers a useful tool that can support more responsive and evidence-based decision-making, helping to better align resources with evolving development priorities.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Transport Development Priorities in Papua and West Papua(World Bank, 2009-10-01)The province of Papua of the Republic of Indonesia was provided special autonomy under law 21-2001 in recognition of the fact that 'the management and use of the natural wealth of Tanah Papua has not yet been optimally utilized to enhance the living standard of the natives, causing a deep gap between the Papua province and the other regions, and violations of the basic rights of the Papuan people.' The goal of special autonomy was to help Papua and Papuans catch up to the rest of Indonesia in terms of living standards and opportunities. Yet, now almost a decade later, and after the split into two provinces: Papua and West Papua, progress toward this goal has been slow. In recognition of this, the Indonesian central government issued presidential instruction 5-2007 on the acceleration of development of Papua and West Papua instructing all relevant technical ministries to devote special attention to the two provinces and to coordinate their programs with the governors of both provinces. Transport is a key piece of the development puzzle and is a high priority for all levels of government in Papua and West Papua. Yet, despite this, and large amounts of investment channeled toward the sector, the people of Papua and West Papua are not receiving substantially better transportation services than they were before special autonomy. This report aims to set out a set of priorities that transport development must follow in Papua and West Papua if investments are to be productive and remain useful for their entire design life.Publication Do Donors Get What They Paid For? Micro Evidence on the Fungibility of Development Project Aid(World Bank: Washington, DC, 2005-03)Recipient government responses to development project aid have typically been studied at high levels of aggregation, using cross-country comparisons and/or aggregate time series data. Yet increasingly the relevant decisions are being made at the local level, in response to specific community-level projects. The authors use local-level data to test for fungibility of World Bank financing of rural road rehabilitation targeted to specific geographic areas of Vietnam. A simple double difference estimate suggests that the project's net contribution to rehabilitated road increments is close to zero, suggesting complete displacement of funding. However, with better controls for the endogeneity of project placement the authors find much less evidence of fungibility, with displacement accounting for around one-third of the aid. The results point to the importance of dealing with selection bias in assessing project aid fungibility.Publication Revising the Roads Investment Strategy in Rural Areas : An Application for Uganda(2009-09-01)Based on extensive data collection in Uganda, this paper demonstrates that the rural access index, as defined today, should not be a government objective because the benefit of such investment is minimal, whereas achieving rural accessibility at less than 2 kilometers would require massive investments that are not sustainable. Taking into account the fact that plot size is limited on average to less than 1 hectare, a farmer s transport requirement is usually minimal and does not necessarily involve massive investments in infrastructure. This is because most farmers cannot fully load a truck or pay for this service and, even if productivity were to increase significantly, the production threshold would not be reached by most individual farmers. Therefore, in terms of public policy, maintenance of the existing rural roads rather than opening new roads should be given priority; the district feeder road allocation maintenance formula should be revised to take into account economic potential and, finally, policy makers should devote their attention to innovative marketing models from other countries where smallholder loads are consolidated through private-based consolidators.Publication Peru - Recent Economic Development in Infrastructure : Volume 2. Investing in Infrastructure as an Engine for Growth - Spending More, Faster, and Spending Better(Washington, DC, 2010-12)This report provided the Government of Peru with a comprehensive strategic assessment of three key infrastructure sectors: water/sanitation, transport and electricity, and to propose selected recommendations on how the Government could improve the performance of these sectors. Peru's public expenditure framework shows some rigidities, a number of which were introduced when fiscal resources were scarce or, more recently, because of concerns about a possible risk of inflation. The implementation of the stimulus package has required a laborious transition to remove bottlenecks to faster public spending, sometimes at the risk of affecting the mechanisms that help ensure the quality of public expenditures. The Peruvian authorities have been able to accelerate public investments in infrastructure but little thinking has been dedicated to improving the efficiency and effectiveness of such investments. The report concludes that Peru should focus on: prioritizing infrastructure investments through improved planning, promoting efficiency in infrastructure delivery, enhancing sub-national governments' capacity with respect to infrastructure, and leveraging the participation of the private sector.Publication Institutional Development and Good Governance in the Highway Sector(World Bank, Washington, DC, 2010)The World Bank financed the Gujarat State Highway Project (GSHP) during 2001-07. The project development objective was to enhance the capacity of the Government of Gujarat (GOG) for effective and efficient planning and management of road infrastructure, while concurrently maximizing existing road infrastructure asset productivity through priority investments and increased maintenance funding. The project not only achieved its objective and targets successfully, but also was implemented with a significant cost reduction (about 23 percent). The GSHP resulted in a reduction in the backlog of major maintenance and an improved network to meet rapidly growing transport demand in the state. The project had the unique distinction of no contract disputes, a rarity among the highway development projects in India. The project also set best practices in developing and managing a very comprehensive asset management system, state of the art quality assurance framework and a very comprehensive training and capacity building program. The annual road sector allocation has grown from USD 30 million in 1995-1996 to an impressive USD 610 million in 2010-11, currently the second largest among all the Indian states. This study attempts to identify the key elements of the Gujarat road sector reforms and explores whether and, if so, how such reforms can be replicated across other Indian states and possibly even in other countries in the region.
Users also downloaded
Showing related downloaded files
Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication Business Ready 2024(Washington, DC: World Bank, 2024-10-03)Business Ready (B-READY) is a new World Bank Group corporate flagship report that evaluates the business and investment climate worldwide. It replaces and improves upon the Doing Business project. B-READY provides a comprehensive data set and description of the factors that strengthen the private sector, not only by advancing the interests of individual firms but also by elevating the interests of workers, consumers, potential new enterprises, and the natural environment. This 2024 report introduces a new analytical framework that benchmarks economies based on three pillars: Regulatory Framework, Public Services, and Operational Efficiency. The analysis centers on 10 topics essential for private sector development that correspond to various stages of the life cycle of a firm. The report also offers insights into three cross-cutting themes that are relevant for modern economies: digital adoption, environmental sustainability, and gender. B-READY draws on a robust data collection process that includes specially tailored expert questionnaires and firm-level surveys. The 2024 report, which covers 50 economies, serves as the first in a series that will expand in geographical coverage and refine its methodology over time, supporting reform advocacy, policy guidance, and further analysis and research.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.