Spring 2008
William Easterly and Tobias Pfutze
Journal of Economic Perspectives, Vol. 22, No. 2, 29-52.

Where Does the Money Go? Best and Worst Practices in Foreign Aid
Foreign aid from official sources to developing countries (excluding private aid) amounted to $103.6 billion in 2006 and has amounted to over $2.3 trillion (measured in 2006 dollars) over the past 50 years. There have been fierce debates over how effective this aid has been or could be in the future (for example, Sachs, 2005; Easterly, 2006). However, this paper does not address the already ubiquitous issue of aid effectiveness—that is, the extent to which foreign aid dollars actually achieve their goals of reducing poverty, malnutrition, disease, and death. Instead, this paper focuses on “best practices” in the way in which official aid is given, which is an important component of the wider debate.