Fungibility and the Flypaper Effect of Project Aid: Micro-Evidence for Vietnam

By Dominique van de Walle, R. Mu. 2007

127 citations recorded by the source corpus.

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.

Subfields: Development, Economics and Econometrics, Safety Research

View Paper: https://www.semanticscholar.org/paper/cfb737a1e28b7c634e7a842413009e469e4d84b1

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Citations in the corpus

Development Aid and Economic Growth: A Positive Long-Run Relation (2009, unknown): “A more specific literature on whether aid is fungible has come to ambiguous conclusions (Feyzioglu, Swaroop, & Zhu, 1998; Howard & Rothenberg, 1993; Khilji & Zampelli, 1994; Pettersson, 2007; Van de Walle & Cratty, 2005; Van de Walle & Mu, 2007).”
Evaluating Anti-Poverty Programs (2005, unknown): “This problem is studied by van de Walle and Mu (2007) in the context of a World Bank financed rural-roads project in Vietnam.”
Aid and Government Fiscal Behavior: Assessing Recent Evidence (2015, background): “There may even be fungibility within projects or sectors; e.g., van de Walle and Mu (2007) find that some of the aid intended to finance road building in one province in Viet Nam appeared to support roads in another province.”
Aid on Demand: African Leaders and the Geography of China's Foreign Assistance (2015, unknown): “For example, van de Walle and Mu (2007) investigate fungibility of World Bank funds spent on a road rehabilitation project in Vietnam and find evidence of a “flypaper effect” rather than full fungibility. of mines is statistically significant at conventional levels for all aid variables in the…”
Aid and Growth at the Regional Level (2015, unknown): “Van de Walle and Mu (2007) find evidence of a “flypaper effect” rather than full fungibility in their study of a road rehabilitation project co-financed by the World Bank in Vietnam.”
Rural Roads and Poor Area Development in Vietnam (2007, methodology): “The detailed results are reported in van de Walle and Mu (2007), so we only summarize them here.”
Rural Roads and Local Market Development in Vietnam (2011, methodology): “The detailed results of the logit model and density graphs of the propensity scores are given in van de Walle and Mu (2007).”
Agricultural Growth and Poverty Reduction (2009, background): “Investment in rural roads can similarly have high rates of return, but the level of this return and the incidence of gains and losses across households depend importantly on complementary investments and on households’ distance from market and asset endowments (van de Walle and Mu 2007).”