Limits of Conditionality in Poverty Reduction Programs

July 1, 2002

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Format: Chicago

Giovanni Dell'Ariccia, and Tito Cordella. Limits of Conditionality in Poverty Reduction Programs, (USA: International Monetary Fund, 2002) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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."

Subject: Debt relief, Poverty reduction, Poverty reduction strategy

Keywords: WP

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/115
Stock No:

WPIEA1152002
ISBN:

9781451853872
ISSN:

1018-5941

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