Development Research Institute at New York University

The BBVA Foundation Frontiers of Knowledge Award in the Development Cooperation category goes in this second edition to the Development Research Institute, DRI, at New York University, for its contribution to the analysis of foreign aid provision, and its challenge to the conventional wisdom in development assistance.

This U.S. institute, founded in 2003, is devoted to research on the economic development and growth of poor countries and to advising aid agencies how to improve their performance.

The DRI has brought a fresh approach to aid and development research, helping ensure that the economic aid rich countries provide to the developing world is better utilized. Its results question certain mainstream assumptions in development cooperation, like the idea that more generosity on the part of rich donor countries will have an automatic pay-off in poor country development.

“At a time when richer countries are being called on to increase aid expenditure, DRI has made it its mission to ensure that these resources are not wasted and that policy advice is effective”, concluded the jury in its resolution, which also singled out DRI’s determination to hold development assistance organizations and national aid agencies accountable to scientific scrutiny. As part of this effort, the DRI released its own aid agency ranking in 2008 elaborated on the basis of transparency and efficiency indicators.

The DRI is co-led by two economics professors at New York University, William Easterly (1957, Morgan Town, West Virginia, USA) and Yaw Nyarko (1960, Accra, Ghana). Easterly holds a Ph.D. in economics from the Massachusetts Institute of Technology and is an expert in the political economy of development and the study of the effectiveness of foreign aid. He has worked in most areas of the developing world, especially Africa, Latin America and Russia. Yaw Nyarko, one of the most highly ranked African academic economists in the world, is Associate Editor of the Journal of Economic Theory and has acted as a consultant to organizations like the World Bank and the United Nations.
 

Overturning stereotypes

Unlike other organizations in the development research field, the DRI not only quantifies the effectiveness of large-scale humanitarian campaigns but also puts forward solutions to improve the way donations are managed. One of the first conclusions of their research is that decisions about the allocation of relief funds cannot be left to foreign governments or multilateral organizations. Instead they need to take close account of the social, cultural and economic peculiarities of the receiving communities in determining how and where the monies can best be spent.

“Development really happens when people figure out the solution to their own problems” were among Easterly’s first words on hearing of the award. And this, precisely, is where the big development plans promoted by the rich world and multilateral organizations like United Nations and World Bank are falling down, according to DRI researchers.

Easterly illustrates this point by reference to microcredits. “They may work very well in some regions and not so well in others. But when they will certainly not work is if they are parceled into some big plan”. To arrive at this conclusion, the DRI has analyzed 346 of the world’s leading microfinance institutions and nearly 18 million active borrowers.

The efficiency failings of large-scale campaigns he sums up thus: “It is a tragedy that the West has spent 2.3 trillion dollars on foreign aid over the last five decades and still has not managed to get twelve-cent medicines to children to prevent half of all malaria deaths. Or that the West has spent 2.3 trillion dollars and still has not managed to get four-dollar bed nets to poor families.”

It was in order to improve the dialogue between donors and beneficiaries that DRI launched its Aid Watch initiative, a digital platform where researchers, policy-makers, commentators and aid practitioners can debate developments and exchange experiences.

DRI’s research also challenges the traditional, hostile view of the “brain drain” effect. As Easterly explains: “the brain drain can be a good thing for poor countries, because the workers who emigrate acquire new skills abroad and come back to their countries with knowledge about technology, access to finance and new business relationships”.