 Better Policies from Policy-Selective Aid?The World Bank Economic Review, 2021, vol. 35, issue 4, 829-844 Abstract: The increased policy selectivity of aid allocations observed in recent years provides aid-recipient countries with an incentive to improve policies. The paper estimates that a change in the World Bank’s Country Policy and Institutional Assessment policy index from 1.5 to 2 for a recipient is associated with an increase of about 13 percent in aid. The analysis also finds a modest but statistically significant positive relationship between the global level of policy-selective aid and policy, suggesting that policy-selective aid improves policies in aid-recipient countries. This effect is properly identified, as the level of policy-selective aid in the global aid budget is exogenous to a recipient country’s policy choice. Furthermore, the paper provides a game-theoretic model that establishes the link between the policy selectivity of the global budget and better recipient-country policies in equilibrium. Keywords: foreign aid allocations; policy selectivity; aid effectiveness; contests (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:wbecrv:v:35:y:2021:i:4:p:829-844. Ordering information: This journal article can be ordered from Access Statistics for this article The World Bank Economic Review is currently edited by Eric Edmonds and Nina Pavcnik More articles in The World Bank Economic Review from World Bank Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC. |
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