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ID: 49997

Effectiveness of Foreign Aid on Poverty Reduction in Kenya

GDN Working Paper Series
Prev Document 15 of 39 Next
GDN-Effectives of Aid.PDF GDN-Effectives of Aid.PDF 2.21 MB

Foreign assistance to developing countries including Kenya has risen in the recent past.
However, poverty levels in these countries have not fallen commensurately. This study
uses difference-in-difference to evaluate the impact of Oversees Development Assistance (ODA) on poverty. It also reviews the status and bottlenecks to the implementation of the 2005 Paris Declaration on aid effectiveness and the impact of its implementation on poverty in Kenya. Using data from 69 districts in Kenya, the results generally show that ODA has significantly reduced poverty in Kenya. The results however, show that ODA disbursements have had stronger impacts on the poorest of the poor more than those who are less poor. This may be a pointer to the fact that donors may have, in the past, put too much emphasis on the poorest of the poor regions and ignored those who are just below the poverty line. This calls for a review of donor funding allocations among the poor regions in order for the impact of ODA to be felt more uniformly. In addition, the results show that the implementation of the 2005 Paris declaration has been felt only by the poorest of the poor and not those who are less poor again calling for emphasis of pro-poor projects in all poor regions. The findings also show strong spillover effects of ODA beyond the month of disbursement underscoring the long-term impacts of the projects.

Website (URL): http://depot.gdnet.org/newkb/submissions/UNDP%20Project_34.pdf

Author(s): Jacob Oduor and Dickson Khainga

Impact Alliance