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Development policy lending, conditionality and ownership: a dynamic agency model perspective

Author

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  • Alberto Paloni
  • Maurizio Zanardi

Abstract

Is the World Bank's Development Policy Lending likely to enhance ownership and have greater effectiveness than structural adjustment? We specify a dynamic common agency model in which a government considering economic reform faces domestic opposition from interest groups. The dynamic specification, which is original in the context of policy reforms supported by the International Financial Institutions (IFIs), is essential to allow the strength of special interest groups to arise endogenously during the reform process. We show that conditionality may alter the country's political equilibrium and lead to higher social welfare. However, under certain circumstances which depend on country-specific circumstances, conditional assistance could lead to lower social welfare. Thus, for conditionality not to be inconsistent with ownership, its design must be appropriate to the country circumstances and directly affect the domestic political constraint.

Suggested Citation

  • Alberto Paloni & Maurizio Zanardi, 2006. "Development policy lending, conditionality and ownership: a dynamic agency model perspective," ULB Institutional Repository 2013/9827, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/9827
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    Cited by:

    1. Wolfgang Mayer & Alex Mourmouras, 2008. "IMF conditionality: An approach based on the theory of special interest politics," The Review of International Organizations, Springer, vol. 3(2), pages 105-121, June.
    2. Vaughn F. Graham, 2017. "Toward a Conceptual Expansion of Ownership and Post‐2015 Global Development Policy: Illustrations from the Jamaican Experience," Development Policy Review, Overseas Development Institute, vol. 35(3), pages 373-395, May.
    3. Graham Mallard, 2014. "Static Common Agency And Political Influence: An Evaluative Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 28(1), pages 17-35, February.

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