Is Results-Based Aid more effective than Input-Based Aid? Evidence from the Health Sector in El Salvador

Results-based aid (RBA) disburses funds based on demonstrable outcomes, rather than inputs. Despite its theoretical appeal and growing adoption, there is limited empirical evidence of its effectiveness. We estimate the effect... [ view full abstract ]

Results-based aid (RBA) disburses funds based on demonstrable outcomes, rather than inputs. Despite its theoretical appeal and growing adoption, there is limited empirical evidence of its effectiveness. We estimate the effect of RBA using a natural experiment in El Salvador where community health teams were established for primary care among the poorest municipalities. While all municipalities implemented the same intervention, they used different funding sources. Fourteen municipalities were funded by Salud Mesoamerica Initiative (SMI), which conditions funds on the attainment of externally measured maternal and child health targets. Fifty-four were funded by conventional aid and 30 used national funds. Using a difference-in-difference approach and national health systems data we find that municipalities with RBA were more effective. They increased the production of preventive services by 42% compared to those with national funding and by 18% compared to those using conventional aid. The effect is mostly driven by increases in maternal and child preventive services incentivized by SMI. We also find positive spillovers on men and older adults. Moreover, our results on available proxy measures suggest improvements in health. The effects of RBA appear to have been driven by a more rapid expansion of infrastructure and physicians by motivated national authorities.