On foreign aid effectiveness: when conditionality met ownership

Francisco Candel-Sánchez

Journal of Economic Policy Reform, 2022, vol. 25, issue 3, 287-304

Abstract: In this paper, we propose a game theoretic approach to deal with the problem of implementing the efficient allocation of aid and reform through policy conditionality. We show that optimality can only be attained by a conditional scheme that takes into account the characteristics of both donor and recipient. Moreover, the levels of aid and reform induced by such a mechanism are, under certain conditions, compatible with the goals of the recipient government. This result reconciles ownership with a specific form of conditionality.

Date: 2022
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DOI: 10.1080/17487870.2021.1941958

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