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Aid and Conditionality

In: Handbook of Development Economics

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  • Temple, Jonathan R.W.

Abstract

This chapter examines the conditions under which foreign aid will be effective in raising growth, reducing poverty, and meeting basic needs in areas such as education and health. The primary aim is not to draw policy conclusions, but to highlight the main questions that arise, the contributions of the academic literature in addressing them, and the areas where much remains unknown. After describing some key concepts and trends in aid, the chapter examines the circumstances under which aid might transform productivity, and when it can achieve things that private capital flows cannot. The chapter reviews the relevant theory and evidence. Next, it turns to some of the other considerations that might form part of a structural model linking outcomes to aid. These include Dutch Disease effects, the fiscal response to aid, and the important connections between aid and governance, both positive and negative.

Suggested Citation

  • Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4415-4523, Elsevier.
    • Handle: RePEc:eee:devchp:v:5:y:2010:i:c:p:4415-4523
    DOI: 10.1016/B978-0-444-52944-2.00005-7
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    Keywords

    foreign aid; conditionality; governance;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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