Optimizing Finance for Development

Tito Cordella

Chapter Chapter 5 in The Palgrave Handbook of Development Finance, 2025, pp 85-102 from Springer

Abstract: Abstract Multilateral Development Banks recently adopted the cascade framework to maximize finance for development. The cascade recommends that reforms be tried first, followed by subsidies, and then public projects. To understand the economics of the cascade, this chapter presents a simple setup where reforms, subsidies, and public projects can be used to fill the investment gap and discusses the welfare associated with their different sequencing. The cascade is optimal when reforms increase efficiency at no cost. When they are costly, if policies can be project-specific their sequencing does not matter; if not, the cascade can be optimal when agents are myopic but not when they are forward-looking. Tensions may thus arise between maximizing private financing and optimizing financing for development.

Keywords: F35; H23; H25; H54; L32; L51; Cascade; Finance for development; Reforms; Subsidies; Public investments; Multilateral development banks (search for similar items in EconPapers)
Date: 2025
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Working Paper: Optimizing finance for development (2018)
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DOI: 10.1007/978-3-031-77422-5_5

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