Impact evaluation as leverage

While banks, homeowners and a few governments in the US and Europe are "de-leveraging," the buzzword in the aid business is "leveraging"--using scarce aid resources to crowd-in other resources, such as tax revenues and private capital flows.  The reason is simple:   aid resources are limited (partly due to the economic slowdown in donor countries from their de-leveraging) but development needs are great, so using aid money to stimulate tax revenues or guarantee private investors' risk could square the circle.

But we don’t just want to increase the amount of resources available:  we want to make sure those resources are spent on activities that reduce poverty.  This suggests a different way of thinking of leveraging. 

Suppose some of the aid were used to undertake a rigorous impact evaluation of a development intervention, such as vouchers for schoolchildren or report cards on the quality of health clinics.  If the results are positive in terms of development outcomes, then the impact evaluation would have shown governments how to make productive use of their own resources.  The rigorous impact evaluations of conditional cash transfers in Mexico and Brazil showed these countries how to scale up social assistance and avoid wasteful, untargeted public expenditures.  Likewise, if the impact evaluation is negative, it would show the government and the world what to avoid, saving resources that may have been wasted. Either way, the impact evaluation would have “leveraged" additional resources.

To be sure, we need to be careful in transferring findings of an impact evaluation in one country to another, because the underlying politics differ across countries, and this difference could be critical in the success of a program.  We need to avoid the temptation of policy advocacy.  [Not everyone should use conditional cash transfers even if they produced favorable results in Mexico and Brazil.] Rather, aid could be leveraged by designing knowledge partnerships to generate better evidence within countries of the impact of existing policies.  The evidence of development impact (or lack thereof) could empower citizens to demand better policies or, conversely, thwart riots for populist policies that are unlikely to help the poor.