Limits of Conditionality in Poverty Reduction Programs

Journal Issue

Volume/Issue:: 2002/115
Series:: IMF Working Papers
Author(s):: Giovanni Dell'Ariccia, and Tito Cordella
Publisher:: INTERNATIONAL MONETARY FUND
Published Date:: July 2002
DOI:: http://dx.doi.org/10.5089/9781451853872.001
ISBN:: 9781451853872
ISSN:: 1018-5941
Page:: 24

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."

Limits of Conditionality in Poverty Reduction Programs

Limits of Conditionality in Poverty Reduction Programs

Article

Limits of Conditionality in Poverty Reduction Programs

Author(s):: Giovanni Dell'Ariccia, and Tito Cordella
Published Date:: July 2002

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Limits of Conditionality in Poverty Reduction Programs

Limits of Conditionality in Poverty Reduction Programs

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