Aid and policies under weak donor conditionality
Federico Giulio
Aid and policies under weak donor conditionality created by Giulio Federico - Journal of African Economies Volume 13, number 3 .
Donors who seek to impose policy conditionality on countries receiving their aid commonly face conflicting incentives between using aid to induce income-increasing reforms and using it to assist low-income countries: this conflict can lead to a time-consistency problem. This paper illustrates how conditionality contracts are affected by conflicting donor incentives in the presence of limited commitment power. Conditionality is shown to survive in an environment with weak donor commitment power, and it can eliminate the inefficiency associated with the no-conditionality outcome. However, even when conditionality is successfully imposed by donors, there may be an inverse relationship between aid and reform across different aid recipients.
09638024
Development aid--Conditionality
HC800.A1 JOU
Aid and policies under weak donor conditionality created by Giulio Federico - Journal of African Economies Volume 13, number 3 .
Donors who seek to impose policy conditionality on countries receiving their aid commonly face conflicting incentives between using aid to induce income-increasing reforms and using it to assist low-income countries: this conflict can lead to a time-consistency problem. This paper illustrates how conditionality contracts are affected by conflicting donor incentives in the presence of limited commitment power. Conditionality is shown to survive in an environment with weak donor commitment power, and it can eliminate the inefficiency associated with the no-conditionality outcome. However, even when conditionality is successfully imposed by donors, there may be an inverse relationship between aid and reform across different aid recipients.
09638024
Development aid--Conditionality
HC800.A1 JOU