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Creating a market for outcomes: shopping for solutions

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  • Marie Moland Gaarder
  • Ulrich Bartsch

Abstract

This article suggests that interactions between development agencies and recipient governments are mostly about inputs deemed (but not known) to contribute to improvements in living standards in recipient countries, rather than outcomes. We argue that the development marketplace is beset by market imperfections because of externalities, principal-agent problems and decision-making under uncertainty, which not only makes it difficult to achieve the right outcomes, but also takes away incentives to learn about outcomes. A fundamental rethink of responsibilities and accountabilities in the development business would make sure that development outcomes are traded in the development marketplace. It would put recipient countries in charge of contracting development agencies to provide these outcomes. Development agencies would commit to, and be held financially accountable for, outcomes, that is, real improvements in welfare indicators. We describe the role of the evaluation function in aligning incentives with the ultimate goal of improving lives, and provide examples of emerging solutions.

Suggested Citation

  • Marie Moland Gaarder & Ulrich Bartsch, 2015. "Creating a market for outcomes: shopping for solutions," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 7(3), pages 304-316, September.
    • Handle: RePEc:taf:jdevef:v:7:y:2015:i:3:p:304-316
    DOI: 10.1080/19439342.2015.1068357
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    References listed on IDEAS

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    1. Patrick Slovik, 2011. "Market uncertainty and market instability," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Proceedings of the IFC Conference on "Initiatives to address data gaps revealed by the financial crisis", Basel, 25-26 August 2010, volume 34, pages 430-435, Bank for International Settlements.
    2. Nancy Birdsall & Ayah Mahgoub & William D. Savedoff, 2010. "Cash on Delivery: A New Approach to Foreign Aid," Working Papers id:3308, eSocialSciences.
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