Handbook on the Economics of Foreign Aid
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Handbook on the Economics of Foreign Aid

Edited by B. Mak Arvin and Byron Lew

It would be fair to say that foreign aid today is one of the most important factors in international relations and in the national economy of many countries – as well as one of the most researched fields in economics. Although much has been written on the subject of foreign aid, this book contributes by taking stock of knowledge in the field, with chapters summarizing long-standing debates as well as the latest advances. Several contributions provide new analytical insights or empirical evidence on different aspects of aid. As a whole, the book demonstrate how researchers have dealt with increasingly complex issues over time – both theoretical and empirical – on the allocation, impact, and efficacy of aid, with aid policies placed at the center of the discussion.
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Chapter 27: Foreign aid and policy coherence for development

Stephen Brown


Advocates of international development tend to focus on the size of donor countries’ aid flows, exhorting governments to reach the quantitative target of 0.7 percent of gross national income. However, equally if not more important are the quality of foreign aid and the contribution of non-aid policies to development in the Global South. Indeed, improvements in aid effectiveness and donor policies in other areas could have a greater impact than simply increasing aid budgets. Key to the goal of development is the concept of policy coherence, through which one or more actors’ policies work in tandem, synergistically or at least not in open contradiction, to promote a common overarching objective. This chapter analyses the concept of policy coherence for development (PCD), which applies the notion of policy coherence to the policy field of development cooperation. Policy coherence for development has become, since the early 2000s, a central component of the development discourse. Development is an ill-defined term, which can be used to express various concepts, including economic growth, poverty reduction, improved wellbeing and greater opportunities to fulfill human potential. The common thread, however, is the central idea that benefits will accrue to developing countries and the people who live in them. Though PCD is a key tool for development and its potential is widely recognized, problems in applying it go beyond the technical difficulties that are commonly evoked.

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