Budget Support Versus Project Aid

Tito Cordella and Giovanni Dell'ariccia

No 2003/088, IMF Working Papers from International Monetary Fund

Abstract: Should donors who are interested in the effectiveness of developmental programs rely on conditional budget support or on project aid? To answer this question, we present a model in which only a subset of the developmental expenditures can be subject to conditionality. We show that budget support is preferable to project aid when donors and recipients' preferences are aligned, and when assistance is small relative to recipients' resources. Then, we test our model estimating a modified growth model for a panel of developing countries, and find evidence in support of our predictions.

Keywords: WP; budget support; first derivative; aid policy; conditionality; asymmetric information; empirical growth models; policy Index; project aid; recipient government; Budget planning and preparation; Project loans; Poverty reduction; Capital spending; Sub-Saharan Africa; East Asia (search for similar items in EconPapers)
Pages: 32
Date: 2003-04-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

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