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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 developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

  • Sylviane Guillaumont Jeanneney

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

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.

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Paper provided by HAL in its series Working Papers with number halshs-00557130.

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Date of creation: 18 Jan 2011
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Handle: RePEc:hal:wpaper:halshs-00557130

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Keywords: Aid effectiveness; absorptive capacity; Conditionality; volatility;

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  1. Pierre-Richard Agénor & Nihal Bayraktar & Emmanuel Pinto Moreira & Karim El Aynaoui, 2006. "Achieving the Millennium Development Goals in Sub-Saharan Africa: A Macroeconomic Monitoring Framework," The World Economy, Wiley Blackwell, vol. 29(11), pages 1519-1547, November.
  2. Isham, Jonathan & Kaufmann,Daniel, 1995. "The forgotten rationale for policy reform : the productivity of investment projects," Policy Research Working Paper Series 1549, The World Bank.
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Cited by:
  1. Gaoussou Diarra, 2011. "Aid unpredictability and absorptive capacity: analyzing disbursement delays in Africa," Economics Bulletin, AccessEcon, vol. 31(1), pages 1004-1017.

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