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Project Aid or Budget Aid? The Interests of Governments and Financial Institutions

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  • Carsten Hefeker

Abstract

The paper compares different aid policy instruments and their effect on the target group. Starting from a situation where interest groups compete for the resources of the government, international financial institutions aim to change the policy outcome. They can either directly support one group or condition their financial help to the government on its policy. Apart from a normative analysis which policy is more adequate to help one group, the paper asks what happens if the aid agency is driven by bureaucratic self-interest. Copyright � 2006 The Author; Journal compilation � 2006 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Development Economics.

Volume (Year): 10 (2006)
Issue (Month): 2 (05)
Pages: 241-252

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Handle: RePEc:bla:rdevec:v:10:y:2006:i:2:p:241-252

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References

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  1. Svensson, J., 1995. "When Is Foreign Aid Policy Credible? Aid Dependence and Conditionality," Papers 600, Stockholm - International Economic Studies.
  2. Tito Cordella & Giovanni Dell'Ariccia, 2003. "Budget Support Versus Project Aid," IMF Working Papers 03/88, International Monetary Fund.
  3. Alesina, Alberto & Dollar, David, 2000. " Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
  4. Easterly, William, 2005. "What did structural adjustment adjust?: The association of policies and growth with repeated IMF and World Bank adjustment loans," Journal of Development Economics, Elsevier, vol. 76(1), pages 1-22, February.
  5. Svensson, Jakob, 2003. "Why conditional aid does not work and what can be done about it?," Journal of Development Economics, Elsevier, vol. 70(2), pages 381-402, April.
  6. Axel Dreher & Nathan Jensen, 2005. "Independent Actor or Agent? An Empirical Analysis of the impact of US interests on IMF Conditions," KOF Working papers 05-118, KOF Swiss Economic Institute, ETH Zurich.
  7. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  8. Alex Mourmouras & Wolfgang Mayer, 2002. "Vested Interests in a Positive Theory of IFI Conditionality," IMF Working Papers 02/73, International Monetary Fund.
  9. Carsten Hefeker & Katharina Michaelowa, 2005. "Can process conditionality enhance aid effectiveness?," Public Choice, Springer, vol. 122(1), pages 159-175, January.
  10. Lane, Philip R & Tornell, Aaron, 1996. " Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-41, June.
  11. Michaelowa, Katharina & Hefeker, Carsten, 2003. "Can Process Conditionality Enhance Aid Effectiveness? The Role of Bureaucratic Interest and Public Pressure," HWWA Discussion Papers 239, Hamburg Institute of International Economics (HWWA).
  12. Azam, Jean-Paul & Laffont, Jean-Jacques, 2003. "Contracting for aid," Journal of Development Economics, Elsevier, vol. 70(1), pages 25-58, February.
  13. James M. Boughton & Alex Mourmouras, 2002. "Is Policy Ownership An Operational Concept?," IMF Working Papers 02/72, International Monetary Fund.
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Citations

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Cited by:
  1. Sanjay Jain, 2007. "Project Assistance versus Budget Support: An Incentive-Theoretic Analysis of Aid Conditionality," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(4), pages 694-719, December.
  2. Axel Dreher & Silvia Marchesi, 2013. "Information transmission and ownership consolidation in aid programs," Working Papers 255, University of Milano-Bicocca, Department of Economics, revised Oct 2013.
  3. Furukawa, Mitsuaki & Takahata, Junichiro, 2013. "Is GBS Still a Preferable Aid Modality?," Working Papers 50, JICA Research Institute.
  4. Paul Clist & Alessia Isopi & Oliver Morrissey, 2012. "Selectivity on aid modality: Determinants of budget support from multilateral donors," The Review of International Organizations, Springer, vol. 7(3), pages 267-284, September.
  5. Izabela Jelovac & Frieda Vandeninden, 2008. "How should donors give foreign aid? Project aid versus budget support," Post-Print halshs-00293130, HAL.
  6. Ivo Bischoff & Frédéric Blaeschke, 2012. "Window-Dressing and Lobbying in Performance-Budgeting: a Model for the Public Sector," MAGKS Papers on Economics 201212, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  7. Bah, El-hadj M. & Ward, Jeremy, 2011. "Effectiveness of foreign aid in Small Island Developing States," MPRA Paper 32062, University Library of Munich, Germany.

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