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Budget Support Versus Project Aid
Author:
Mr. Tito Cordella
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Mr. Giovanni Dell'Ariccia
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Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 088
Language:
English
Publication Date:
01 Apr 2003
DOI:
https://doi.org/10.5089/9781451851182.001
ISBN:
9781451851182
ISSN:
1018-5941
Pages:
32
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
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2003: Issue 088