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Limits of Conditionality in Poverty Reduction Programs

Author/Editor: Cordella, Tito | Dell'Ariccia, Giovanni
Authorized for Distribution: July 1, 2002
Electronic Access: Free Full Text (PDF file size is 750KB)
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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(s): Development assistance | Conditionality | Poverty | Income distribution | Economic models
Author's keyword(s): Aid | Poverty Reduction | Conditionality | Asymmetric Information
 
English  
    Published:   July 1, 2002        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA1152002   Pages:   24
    Price:   US$15.00
       
     
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