The Future of Foreign Aid Is…Collective Funding of Impact Evaluations

Aid agencies, start your engines.  The race toward the future is about to begin and the roadway will not look like anything you see in the rearview mirror.

The world has long since ceased to be a place of rich and poor countries. It is a place where countries differ over a range of resources, capacities, and needs. New York City has as much to learn from Mexico’s conditional cash transfers as Tanzania does from India’s literacy tests. It is a placed where the bulk of spending on social programs and infrastructure in most low- and middle-income countries is financed by domestic revenues, not foreign aid. It is a place where knowledge drives development more than capital. What does all this mean for the role of aid?

In “The Future of Aid,” Ruth Levine and I argue that an important role, if not the primary one, for foreign aid is to collectively finance impact evaluations and the associated research that provides the basis for improving public policies—everywhere. All governments could do better if they knew whether their public programs work as intended or are, instead, wasting tax dollars and slowing social and economic progress. So why not recognize the knowledge generated by impact evaluations as the public good that it is? As a public good, no individual institution, be it aid agency, national government or implementing organization, has sufficient incentive to invest at a level commensurate with the potential payoff from these kinds of studies.

The roughly $50 million a year spent to rigorously study public policies in developing countries is woefully inadequate relative to the $130 billion being disbursed annually as official development assistance and the trillions of dollars spent by low- and middle-income countries themselves.  Knowledge-creation requires a greater commitment, and a collective commitment.  In our paper, we argue that transferring 0.1 percent of annual aid disbursements and 0.01 percent of domestic public programs to collective institutions for funding impact evaluations would redress this imbalance.

But why dedicate this money to collectively funded institutions instead of each country commissioning or conducting its own studies? First, we can only assure adequate investment if we have joint commitments. Left to their own devices, countries have strong incentives to be free riders. Second, collective institutions can do a better job of commissioning studies in terms of ensuring independence and quality. They can also support studies wherever research is likely to generate the most useful information and cluster those studies around common themes to increase reliability and generalizability. Finally, collective institutions can be more efficient at mobilizing scarce expert resources and administration, like grant review.

Ruth and I have no illusions that impact evaluations hold sway over policy choices. In “The Future of Aid,” we acknowledge that evidence is only one of many factors in policy debates which are inherently political, in the best sense of that term. But evidence still can influence those debates, particularly if it comes from studies of high-quality, relevant to current questions and interpreted within a broad body of evidence. 

This is the International Year of Evaluation and the year that the world adopts its Sustainable Development Goals. It’s a great moment to build on the recent growth in relevant studies, research capacity, and political interest by recognizing collective funding of impact evaluations as the future of foreign aid.

Thanks to Ruth Levine for her contributions to this blog and for being such a great draft partner and spotter.