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Submitted by D Phillips on

This article by Jeffery Hammer is very welcome and important in that it raises a systemic issue (regarding tax incidence) behind whether projects in a particular sector are worth doing or not relative to other projects in other sectors, and it also points to the highly incremental nature of the current spate of impact evaluation research which raises serious questions about its ultimate ability to guide broad strategy for development. The taxation issue is however even more important systemically than the paper suggests. One of the key reasons for project failure as we all know is failure of local 'ownership.' Local ownership in turn is closely linked to accountability, as we all know. One of the key elements of accountability arises from a financial stake in results. Where externally aided projects are part of a broad and intrusive foreign aid sector (i.e. where there is high aid dependency as in many African countries) there is a break in the principal/agent chain that weakens local accountability, but there is also a weakening in the financial stake in results of the Government and people since it is not necessary (to the extent of the level of aid) for Parliament to appropriate tax revenue to pay for public expenditure and not necessary to undergo the difficult negotiation with the citizens and voters about raising their taxes which are at the heart of a democracy. This aggravates the serious deficiencies in institutional development that we all know about. While impact evaluation of a project can potentially provide useful technical pointers to what to do within specific sectors within specific locations and conceivably beyond these specific situations (assuming that the experimental design is OK, the econometrics are done right, the participants cooperate and the funding is enough to pay for it all) the systemic problems that undermine aid effectiveness are however not touched. If systemic issues are not touched then impact evaluation does not shed light on a key set of reasons why projects fail. If we want development aid to have any success it might be better to put much more effort into understanding how political and institutional barriers undermine programs and projects and how they can be designed to compensate for such barriers and less into developing technical libraries of hopeful good practices. (www.developmentwithoutaid.com).