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Absorptive Capacity: More Than the Volume of Aid, its Modalities Matter

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  • Patrick Guillaumont

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

  • Sylviane Guillaumont Jeanneney

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

Abstract

We examine whether absorptive capacity represents a valid reason to reject the proposal of a large aid increase in order to help poor countries to move out of the underdevelopment trap. We consider absorptive capacity, the set of limits to an effective use of aid inflows, under for main aspects: 1) disbursement constraints, which lead to under utilisation of credits; 2) macroeconomic troubles, including loss of competitiveness and macroeconomic volatility; 3) decrease of aid returns, actually slower in more vulnerable countries, 4) institutions weakening induced by aid dependency. We argue that these limits to absorptive capacity may be removed by an improvement of aid modalities, such as better balancing between productive and social activities financed by aid, using aid as insurance against exogenous shocks, giving priority in aid allocation to "least developed countries", which are the most vulnerable, and finally substituting a performance-based conditionality to the traditional-policy based one.

Suggested Citation

  • Patrick Guillaumont & Sylviane Guillaumont Jeanneney, 2011. "Absorptive Capacity: More Than the Volume of Aid, its Modalities Matter," CERDI Working papers halshs-00557130, HAL.
    • Handle: RePEc:hal:cdiwps:halshs-00557130
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00557130
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    References listed on IDEAS

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