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

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Author Info
Hefeker, Carsten

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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 also asks what happens if the IFI is driven by bureaucratic self-interest, and whether this distort policies.

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Publisher Info
Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Kiel 2005 with number 19.

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Date of creation: 2005
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Handle: RePEc:zbw:gdec05:3492

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Related research
Keywords: aid policy; conditionality; international financial institutions; interest groups;

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Find related papers by JEL classification:
F35 - International Economics - - International Finance - - - Foreign Aid
O23 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Robert K. Fleck & Christopher Kilby, 2006. "World Bank Independence: A Model and Statistical Analysis of US Influence," Review of Development Economics, Blackwell Publishing, vol. 10(2), pages 224-240, 05. [Downloadable!] (restricted)
    Other versions:
  2. Svensson, Jakob, 2000. "Foreign aid and rent-seeking," Journal of International Economics, Elsevier, vol. 51(2), pages 437-461, August. [Downloadable!] (restricted)
  3. Hefeker, Carsten & Michaelowa, Katharina, 2003. "Can Process Conditionality Enhance Aid Effectiveness? The Role of Bureaucratic Interest and Public Pressure," Discussion Paper Series 26389, Hamburg Institute of International Economics. [Downloadable!]
  4. Azam, Jean-Paul & Laffont, Jean-Jacques, 2003. "Contracting for aid," Journal of Development Economics, Elsevier, vol. 70(1), pages 25-58, February. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
    Other versions:
  6. James M. Boughton & Alex Mourmouras, 2002. "Is Policy Ownership An Operational Concept?," IMF Working Papers 02/72, International Monetary Fund. [Downloadable!]
  7. Lahiri, Sajal & Raimondos-Møller, Pascalis, 2000. "Special Interest Politics and Aid Fungibility," CEPR Discussion Papers 2482, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  8. Lahiri, Sajal & Raimondos-Moller, Pascalis, 2000. "Lobbying by Ethnic Groups and Aid Allocation," Economic Journal, Royal Economic Society, vol. 110(462), pages C62-79, March. [Downloadable!] (restricted)
    Other versions:
  9. Lane, Philip R & Tornell, Aaron, 1996. " Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-41, June.
  10. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February. [Downloadable!] (restricted)
  11. 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. [Downloadable!] (restricted)
  12. Axel Dreher & Nathan Jensen, 2003. "Independent Actor or Agent? An Empirical Analysis of the impact of US interests on IMF Conditions," International Finance 0310004, EconWPA, revised 08 Jan 2004. [Downloadable!]
    Other versions:
  13. Carsten Hefeker & Katharina Michaelowa, 2005. "Can process conditionality enhance aid effectiveness?," Public Choice, Springer, vol. 122(1), pages 159-175, January. [Downloadable!] (restricted)
  14. Allan Drazen & Peter Isard, 2004. "Can Public Discussion Enhance Program Ownership?," NBER Working Papers 10927, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Sanjeev Gupta & Peter S. Heller, 2002. "Challenges in Expanding Development Assistance," IMF Policy Discussion Papers 02/5, International Monetary Fund.
  16. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank. [Downloadable!]
    Other versions:
  17. Tito Cordella & Giovanni Dell'Ariccia, 2003. "Budget Support versus Project Aid," IMF Working Papers 03/88, International Monetary Fund. [Downloadable!]
  18. Wolfgang Mayer & Alex Mourmouras, 2002. "Vested Interests in a Positive Theory of IFI Conditionality," IMF Working Papers 02/73, International Monetary Fund.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Izabela Jelovac & Frieda Vandeninden, 2008. "How should donors give foreign aid? Project aid versus budget support," Post-Print halshs-00293130_v1, HAL. [Downloadable!]
    Other versions:
  2. 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. [Downloadable!] (restricted)
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