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Optimizing Finance for Development

In: The Palgrave Handbook of Development Finance

Author

Listed:
  • Tito Cordella

    (Johns Hopkins University SAIS Europe)

Abstract

Multilateral Development Banks recently adopted the cascade framework to maximize finance for development. The cascade recommends that reforms be tried first, followed by subsidies, and then public projects. To understand the economics of the cascade, this chapter presents a simple setup where reforms, subsidies, and public projects can be used to fill the investment gap and discusses the welfare associated with their different sequencing. The cascade is optimal when reforms increase efficiency at no cost. When they are costly, if policies can be project-specific their sequencing does not matter; if not, the cascade can be optimal when agents are myopic but not when they are forward-looking. Tensions may thus arise between maximizing private financing and optimizing financing for development.

Suggested Citation

  • Tito Cordella, 2025. "Optimizing Finance for Development," Springer Books, in: George Kararach & Emmanuel Pinto Moreira & Victor Murinde (ed.), The Palgrave Handbook of Development Finance, chapter 0, pages 85-102, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-77422-5_5
    DOI: 10.1007/978-3-031-77422-5_5
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    More about this item

    Keywords

    F35; H23; H25; H54; L32; L51;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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