Aid allocation across the humanitarian-development-peace nexus: the role of fragility as a donors' motive

The Sustainable Development Goals (SDGs) face significant challenges in fragile contexts, where a disproportionate number of the world's extremely poor reside. Official Development Assistance (ODA) is crucial for humanitarian assistance, development projects, and peace operations in these areas. However, effective aid requires coordination across sectors and among donors. The Humanitarian-Development-Peace (HDP) nexus emphasizes integrated interventions, but operationalizing this nexus, particularly in financing, remains a challenge. Humanitarian, development, and peace actors often operate in silos, leading to fragmented funding streams that hinder collaboration. This study addresses the gap in empirical evidence on how donors allocate aid across the HDP nexus in response to fragility by quantitatively analyzing the link between aid allocation and indicators of fragility.

Existing research on aid allocation typically focuses on three categories of motives: donors' self-interest (economic and geopolitical factors), recipients' needs (economic need and population size), and merit (good governance and policy environment). The paper argues that fragility is a distinct factor that impacts all three traditional categories. While some studies link fragility to aid effectiveness through institutional capacity, others emphasize the security implications of fragility for both donors and recipients. The complex interplay of interests and the need for coordination across the HDP nexus make it inappropriate to classify fragility under the existing three categories. Existing literature lacks studies specifically analyzing the relationship between aid allocation across the HDP nexus and multidimensional fragility.

This research employs a three-dimensional panel dataset (donor, recipient, year) covering 23 DAC donors and 126 developing countries from 2009 to 2019. The dependent variables are humanitarian, development, and peace ODA, categorized using OECD's Creditor Reporting System (CRS) purpose codes. Explanatory variables include donors' self-interest (exports, distance, colonial ties, recipient CO2 emissions), recipients' needs (GDP per capita, population), and merit (Freedom House's Index of Freedom). Fragility is measured in two ways: a binary variable indicating the state of fragility (OECD's States of Fragility), and the Fragile States Index (Fund for Peace) representing the degree of fragility. The study uses a random-effect Tobit model to account for the censored nature of the aid data (many zero values). The time-variant explanatory variables are lagged by one year to mitigate endogeneity concerns. Robustness checks, including models with fixed effects for recipients and donors and the use of a reduced FSI, are performed to address heterogeneity issues. Interaction terms between the state of fragility and other variables are also explored.

The main regression analysis reveals that: 1. **Fragility and Humanitarian Aid:** Both the state of fragility and the degree of fragility are positively and significantly associated with humanitarian aid. This indicates that donors respond to the presence and severity of fragility by increasing humanitarian aid. 2. **Fragility and Development Aid:** The relationship between fragility and development aid is less clear. The state of fragility is not significantly associated with development aid, while the degree of fragility shows a small negative, insignificant correlation. This suggests that development aid is less sensitive to fragility. 3. **Fragility and Peace Aid:** The state of fragility has an insignificant effect on peace aid; however, a higher degree of fragility is significantly and positively associated with increased peace aid. This suggests that donors are responsive to the severity, rather than just the presence, of fragility when allocating peace aid. 4. **Other Factors:** The volume of exports was positively correlated with all types of aid across the nexus, highlighting the influence of donors' economic interests. Higher CO2 emissions were negatively correlated with humanitarian and development aid, suggesting that donors prioritize low-emission recipients. Geographic distance had a negative correlation with all aid types, but particularly with peace aid, indicating a focus on geographically closer countries for peacebuilding efforts. Colonial ties show a positive relationship with aid. GDP per capita indicates that donors respond to recipients' economic needs, with some evidence of a middle-income bias in humanitarian and peace aid. Freedom scores were significantly and positively associated with development and peace aid, but negatively associated with humanitarian aid. Donor-specific regressions showed substantial heterogeneity in responses to fragility across different donors and aid categories. Robustness checks, which included fixed effects and a reduced FSI, supported the main findings, particularly the positive relationship between fragility and humanitarian aid and the less clear relationship between fragility and development aid. Interaction terms indicate that donors may differentiate in their aid allocation strategies between fragile and non-fragile recipients.

The study's findings highlight the complex and heterogeneous nature of donor motivations in aid allocation. While donors generally react to fragility, their responses vary significantly based on the type of aid and the measure of fragility used. The positive correlation between fragility and humanitarian aid is consistent with the humanitarian imperative to respond to crisis situations. The less clear relationship with development aid may reflect concerns about absorptive capacity in fragile states. The response to peace aid is a mix of considerations, suggesting that donors consider the severity of fragility rather than just its presence when allocating peace aid. The consistent influence of self-interest (exports), geographic distance, and colonial ties underscores that altruism is not the sole driver of aid allocation. The findings demonstrate the need for better coordination among donors to ensure a more coherent and effective response to fragility.

This study demonstrates the significant yet heterogeneous influence of fragility on aid allocation across the HDP nexus. The findings underscore the need for greater coordination among donors to leverage synergies and avoid inconsistencies in aid delivery. Future research could explore the effectiveness of different aid modalities in fragile contexts and further investigate the interplay between different donor motivations and aid effectiveness in addressing fragility.

The study acknowledges several methodological limitations. The Tobit model assumes that variables affecting aid eligibility also affect aid volume and have the same sign, which might not always hold true. While lagging variables reduces endogeneity, it doesn't entirely eliminate it. The random-effects model is used to address the incidental parameters problem inherent in using fixed effects with limited dependent variables; however, it does not completely address unobserved heterogeneity. The measures of fragility employed, while commonly used, have inherent limitations and may overlap with other explanatory variables.