The impact of SWAps on health aid displacement of domestic health expenditure

Recent research suggests that an additional $1 of health aid would displace – or crowd out – nearly the same amount in a recipient governments’ own health expenditure. Implementing a Sector Wide Approach (SWAp) may exacerbate crowding out because recipient governments should face fewer constraints when allocating health aid. This paper uses rigorous panel data methods to investigate this hypothesised effect of SWAp. We find that SWAp provides not an exacerbating but a potentially protective effect, reducing displacement of government health expenditure. This suggests some aid dollars are more fungible than others, and the mechanism for aid delivery makes a difference.