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Obstacles to progress

Distortions

For three donors (the USA, Australia and the UK) the share of reported contract awards
going back to domestic firms was at least 90 per cent while two of these donors

reported 100 per cent of their ODA as untied (Australia and the UK).
***
we estimate conservatively that the immediate cost of tying – that is, the cost of being
unable to shop around for the best price – was between $1.95 billion and $5.43 billion in

2016. And that is before factoring in the far greater cost of missed opportunities to
catalyse local economic, social and environmental development over the long term.”
"Development, untied : Unleashing the catalytic power of
Official Development Assistance through renewed action on untying" 312
EURODAD

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Aid and "herding" & "volatility"
“ Our preferred measure, using 3-year data and correcting for the bias inherent to the LSV

measure, finds a herding level around 11per cent. That implies that in a world where 50
per cent of all allocation changes are increases, the average recipient experiences 61 per

cent of its donors changing their allocation in the same direction. In other words, half of
the recipients see 61 per cent of their donors increase their allocations, and the other

half sees 61 per cent decrease their aid allocations. The determinants of aid allocation,
common to many donors, warn us against interpreting this quantity as "pure" herding,

instead of similar responses to similar factors.
***
Shocks are expected to create swings in aid allocations and we primarily focused on
these. Their influence has been shown to be relatively limited. It therefore remains that a
large share of the measured herding cannot solely be explained by these shocks. “

"Herding in Aid Allocation" 313
Working Paper No. 279
OECD DEVELOPMENT CENTRE

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“ Key aid sectors in explaining total aid volatility relate to debt, programme assistance,

infrastructure and government. This reflects both these sectors' volatility and their size.
The most volatile aid sectors per se are debt, industry, humanitarian, NGO and

programme assistance. The least volatile are education, health, other social
infrastructure and multi-sector aid. We also find evidence that the volatility of different

aid sectors saw a peak around 2006, which was about when debt aid volatility was at its