Why and How There Should be More Europe in Development Policy

Summary:

Extreme poverty in certain global regions remains one of our greatest international challenges. Between 2014 and 2016, 800 million people suffered from hunger. Nevertheless, most EU member states spend less than the required 0.7 percent of Gross National Income (GNI) for development aid. In addition, resource use is often inefficient since multiple donors often engage in the same countries, which incurs high administrative and transaction costs for both donors and partners.

Using the concepts of fiscal federalism, we argue that shifting more financing and management of development cooperation from member states to the EU would contribute to overcoming these problems. A larger role of the EU budget for financing development aid would better align national costs and benefits and thus reduce free riding. Moreover, transaction costs could fall by reducing aid fractionalization.

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