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Aid and the Soft Budget Constraint


  • Thorsten Janus


The author applies the theory of the soft budget constraint to explain some stylized facts regarding the outcomes and practice of international aid, including ineffectiveness, white elephants, and volatility. The soft budget constraint can also make aid counterproductive. Nonetheless, actual aid institutions may be constrained optimal responses to soft budgets and commonly suggested reforms such as improved donor coordination in aid, focus on fewer countries and projects, and less volatility of aid may lower the effectiveness of aid. The soft budget is also consistent with conservative project selection and the recent focus on "ownership." Copyright © 2009 The Author. Journal compilation © 2009 Blackwell Publishing Ltd.

Suggested Citation

  • Thorsten Janus, 2009. "Aid and the Soft Budget Constraint," Review of Development Economics, Wiley Blackwell, vol. 13(2), pages 264-275, May.
  • Handle: RePEc:bla:rdevec:v:13:y:2009:i:2:p:264-275

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    References listed on IDEAS

    1. Martin Ravallion & Gaurav Datt, 1995. "Is Targeting Through a Work Requirement Efficient? Some Evidence for Rural India," Monash Economics Working Papers archive-41, Monash University, Department of Economics.
    2. T. N. Srinivasan, 1994. "Destitution: A Discourse," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1842-1855, December.
    3. Besley, Timothy & Coate, Stephen, 1992. "Workfare versus Welfare Incentive Arguments for Work Requirements in Poverty-Alleviation Programs," American Economic Review, American Economic Association, vol. 82(1), pages 249-261, March.
    4. Subramanian, Shankar & Deaton, Angus, 1996. "The Demand for Food and Calories," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 133-162, February.
    5. Raghav Gaiha, 2000. "On the Targeting of the Employment Guarantee Scheme in the Indian State of Maharashtra," Economic Change and Restructuring, Springer, vol. 33(3), pages 203-219, October.
    6. Gaiha, Raghav, 2000. "On the Targeting of the Employment Guarantee Scheme in the Indian State of Maharashtra," Economic Change and Restructuring, Springer, vol. 33(3), pages 203-219.
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    Cited by:

    1. Balázs Szent-Iványi, 2015. "Are Democratising Countries Rewarded with Higher Levels of Foreign Aid?," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 65(4), pages 593-615, December.
    2. János Kornai, 2014. "The soft budget constraint," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(supplemen), pages 25-79, November.
    3. Kornai, János, 2014. "Bevezetés A puha költségvetési korlát című kötethez
      [Introduction to the author s volume entitled Soft Budget Constraint]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 845-897.

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