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Aid, Poverty Reduction and the 'New Conditionality'

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  • Paul Mosley
  • John Hudson
  • Arjan Verschoor

Abstract

The paper examines the effect of aid on "poverty", rather than on economic growth. We devise a 'pro-poor (public) expenditure index', and present evidence that, together with inequality and corruption, this is a key determinant of the aid's poverty leverage. After presenting empirical evidence which suggests a positive leverage of aid donors on pro-poor expenditure, we argue for the development of conditionality in a new form, which gives greater flexibility to donors in punishing slippage on previous commitments, and keys aid disbursements to performance in respect of policy variables which governments can influence in a pro-poor direction. Copyright 2004 Royal Economic Society.

Suggested Citation

  • Paul Mosley & John Hudson & Arjan Verschoor, 2004. "Aid, Poverty Reduction and the 'New Conditionality'," Economic Journal, Royal Economic Society, vol. 114(496), pages 217-243, June.
    • Handle: RePEc:ecj:econjl:v:114:y:2004:i:496:p:f217-f243
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