Abstract
It is widely believed that the Millennium Challenge Corporation (MCC) has grossly fallen short of high expectations raised by the Bush administration in 2002. From the perspective of potential recipient countries, the crucial issue is whether the MCC increased the overall pool of aid resources available to them. We argue that this question extends far beyond the distribution of the limited MCC resources. By employing OLS and treatment-effects estimations, we assess how other US aid agencies and non-US donors reacted to MCC decisions. We find that positive signaling effects tend to dominate possible substitution effects not only for overall US aid but also for multilateral donors. Regarding other bilateral donors the evidence is mixed.
Highlights
In March 2002, President Bush announced with great fanfare to increase the US budget for official development assistance (ODA) by $5 billion annually and to decide on the distribution of these funds on strictly performance-based criteria
Eligibility to aid from the Millennium Challenge Corporation (MCC), established in 2004 as an independent entity to administer MillenniumChallenge Account (MCA) funds instead of the existing Agency for International
High expectations raised with the MCC initiative in 2002 have been frustrated in several respects
Summary
In March 2002, President Bush announced with great fanfare to increase the US budget for official development assistance (ODA) by $5 billion annually and to decide on the distribution of these funds on strictly performance-based criteria. Eligibility to aid from the Millennium Challenge Corporation (MCC), established in 2004 as an independent entity to administer MCA funds instead of the existing Agency for International. The “hurdles approach” (Radelet 2003: 24) requires from potential recipient countries to score higher than the median on half the eligibility criteria across peers in the same income category. The number of signed compacts, i.e., the multi-year agreements between MCC and eligible countries on aid programs targeted at reducing poverty and stimulating economic growth, is still fairly small.. The number of signed compacts, i.e., the multi-year agreements between MCC and eligible countries on aid programs targeted at reducing poverty and stimulating economic growth, is still fairly small. At the same time, the MCC “has been extraordinarily slow in disbursing the sizeable amount of funding appropriated to it, raising questions about the efficacy of this new model of performance and ownership-based aid giving” (Lancaster 2008: 8)
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