Donors' Policy Consistency and Economic Growth

Bilateral donors have recognized the need to improve the consistency of donors' policies towards developing countries. However, the impact of policy consistency on economic development has not been documented in the literature to date. Our contribution is twofold: firstly, we use the indices provided by the Center for Global Development (CGD) to construct indicators of overall donors' policies performance and donors' policies consistency at the recipient level. Secondly, we assume that the growth-consistency nexus is dynamic and our results suggest that an increase in consistency by one standard deviation increases growth on average by 1,1 percentage point. This result holds for different instrumentation strategies and robustness checks. We also highlight that the overall policy performance (OPP) increases growth above a sufficient level of donors' policies diversification and level of OPP.