Limits of Conditionality in Poverty Reduction Programs

Author/Editor:

Giovanni Dell'Ariccia ; Tito Cordella

Publication Date:

July 1, 2002

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

When donors and recipients have different preferences over budgetary allocations, conditionality helps the implementation of donor-financed poverty reduction programs. However, if donors cannot perfectly monitor all recipients' actions, conditionality entails an inefficient allocation of resources. Under such conditions, the optimal amount of conditionality varies (often not monotonically) with the recipients' degree of social commitment. Finally, if recipients' preferences are not observable, conditionality can be used to prevent recipients with a weak commitment to poverty reduction from obtaining aid funds. This may however lead to further distortions in terms of resource allocation and to phenomena of "aid rationing."

Series:

Working Paper No. 02/115

Subject:

English

Publication Date:

July 1, 2002

ISBN/ISSN:

9781451853872/1018-5941

Stock No:

WPIEA1152002

Format:

Paper

Pages:

24

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