Institutional governance and aid effectiveness in achieving the sustainable development goals: Cross-country evidence from IDA-eligible countries

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Type of the article: Research Article

Abstract
The effectiveness of international development assistance in promoting sustainable development remains a central question for the management of multilateral aid and public governance as the 2030 Agenda enters its final years. This paper examines the relationship between aid effectiveness, measured by the World Bank’s Country Policy and Institutional Assessment (CPIA), and the achievement of the Sustainable Development Goals (SDGs) across 76 IDA-eligible countries over the period 2005–2023. Using two-way fixed-effects panel estimations with clustered standard errors, the analysis covers five individual SDG indicators (poverty, child mortality, primary education, electricity access, and employment) and the composite SDG Index. The results show that the overall CPIA score is significantly associated with poverty reduction in low-income countries (β = −12.0, p < 0.10), while its effect on the composite SDG Index is statistically insignificant within countries, despite a strong cross-sectional association. A cluster decomposition reveals that structural policies drive improvements in child mortality and electricity access, while economic management supports employment outcomes. Sub-sample analysis demonstrates pronounced heterogeneity: the marginal return to institutional quality is highest in the poorest economies and shifts toward health and labor market outcomes as countries move up the income ladder. GDP per capita remains the dominant predictor across all SDG dimensions, confirming that aid effectiveness complements rather than substitutes for domestic economic capacity. These findings support a differentiated management approach to development assistance that targets specific governance dimensions to specific SDG outcomes and prioritizes institutional strengthening in the most resource-constrained settings.

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    • Table 1. Variable definitions and data sources
    • Table 2. Descriptive statistics (pooled observations, 2005–2023)
    • Table 3. Baseline panel estimation results: CPIA overall → SDG outcomes (TWFE, 2005–2023)
    • Table 4. CPIA cluster decomposition: FE coefficients for individual CPIA dimensions (TWFE, 2005–2023)
    • Table 5. Sub-sample analysis: CPIA overall → SDG outcomes by income group (FE, 2005–2023)
    • Table A1. Data coverage by variable
    • Table A2. CPIA overall score by income group
    • Table A3. Panel structure
    • Table A4. Pairwise correlation matrix (selected variables)
    • Table A5. Demeaned country-specific fixed effects from the baseline TWFE model
    • Conceptualization
      Farhad Rahmanov, Konul Aghayeva, Lala Neymatova
    • Investigation
      Farhad Rahmanov, Lala Neymatova
    • Methodology
      Farhad Rahmanov, Konul Aghayeva, Lala Neymatova, Aygun Aliyeva, Albina Hashimova
    • Resources
      Farhad Rahmanov, Lala Neymatova
    • Supervision
      Farhad Rahmanov, Konul Aghayeva, Aygun Aliyeva
    • Writing – original draft
      Farhad Rahmanov, Konul Aghayeva, Lala Neymatova, Aygun Aliyeva, Albina Hashimova, Taleh Aghazada
    • Writing – review & editing
      Farhad Rahmanov, Konul Aghayeva, Lala Neymatova, Aygun Aliyeva, Albina Hashimova, Taleh Aghazada
    • Formal Analysis
      Konul Aghayeva, Aygun Aliyeva
    • Software
      Konul Aghayeva, Aygun Aliyeva
    • Validation
      Lala Neymatova, Albina Hashimova, Taleh Aghazada
    • Data curation
      Aygun Aliyeva, Albina Hashimova, Taleh Aghazada
    • Funding acquisition
      Albina Hashimova, Taleh Aghazada
    • Project administration
      Albina Hashimova, Taleh Aghazada
    • Visualization
      Albina Hashimova, Taleh Aghazada
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Problems and Perspectives in Management
Problems and Perspectives in Management