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Numerous studies have sought to empirically test the effectiveness of foreign aid as a tool for international development, with often inconsistent or contradictory results. New sources of disaggregated aid data now allow researchers to test the impact of individual sectors of aid on sector-specific outcomes. The paper investigates the effectiveness of foreign aid in the water, sanitation, and hygiene (WaSH) sector and seeks to identify constraints on WaSH aid effectiveness in recipient countries. Multilevel latent growth, dynamic panel, and instrumental variable regression models were estimated on a panel dataset comprising 125 recipient countries over 20 years. WaSH aid was consistently associated with improved health outcomes in middle-income countries; no effect on those outcomes was observed in low-income countries. Potential constraints on the effectiveness of WaSH aid – including political, economic, institutional, and technical constraints – were examined using subgroup analysis. The effectiveness of WaSH aid was found to have been constrained by government ineffectiveness and regulatory quality in recipient countries. Countries with large rural populations also appear to have benefitted less from WaSH aid than more urbanized recipient countries.

Constraints on foreign aid effectiveness in the water, sanitation, and hygiene (WaSH) sector