Limits of Conditionality in Poverty Reduction Programs

Giovanni Dell'ariccia and Tito Cordella

No 2002/115, IMF Working Papers from International Monetary Fund

Abstract: 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."

Keywords: WP (search for similar items in EconPapers)
Pages: 24
Date: 2002-07-01
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Citations: View citations in EconPapers (11)

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Journal Article: Limits of Conditionality in Poverty Reduction Programs (2002)
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