Incentives for Conditional Aid Effectiveness

  1. Candel-Sánchez, Francisco
Journal:
Journal of Globalization and Development

ISSN: 1948-1837 2194-6353

Year of publication: 2014

Volume: 5

Issue: 1

Type: Article

DOI: 10.1515/JGD-2012-0018 GOOGLE SCHOLAR lock_openOpen access editor

More publications in: Journal of Globalization and Development

Sustainable development goals

Abstract

Can sanctions against foreign aid donors enhance the credibility of conditional aid policies ? If such policies suffer from time inconsistency, the answer is positive. This paper proposes a mechanism to overcome the lack of credibility of conditional aid donations to developing countries. A scheme of policy-dependent transfers to the donor country is shown to achieve an optimal commitment outcome by improving the credibility of conditional aid programs. The scheme is devised to cover situations in which the cost of structural reforms is information privately owned by the recipient government.

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