Skip to main content

Aid Conditionality

  • Living reference work entry
  • First Online:
The New Palgrave Dictionary of Economics

Abstract

Aid conditionality refers to the practice of donors attaching conditions to enhance the effectiveness of aid. The donor’s prime objective is to reduce poverty, but recipients want to divert some of the aid to elites. This gives rise to two problems: adverse selection (aid does not go to the recipients who will make best use) and moral hazard (recipients can misuse the aid). The article reviews how aid conditionality can address these problems, and briefly considers empirical evidence.

This chapter was originally published in The New Palgrave Dictionary of Economics, Online edition, 2013. Edited by Palgrave Macmillan

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Institutional subscriptions

Bibliography

  • Azam, J.-P., and J.-J. Laffont. 2003. Contracting for aid. Journal of Development Economics 70(1): 25–58.

    Article  Google Scholar 

  • Bedoya, H. 2005. Conditionality and country performance. In Conditionality revisited: Concepts, experiences and lessons, ed. S. Koeberle et al., pp. 187–195. Washington DC: World Bank.

    Google Scholar 

  • Bougheas, S., I. Dasgupta, and O. Morrissey. 2007. Tough love or unconditional charity? Oxford Economic Papers 59(4): 561–582.

    Article  Google Scholar 

  • Bourguignon, F., and J.-P. Platteau. 2012. Does aid availability affect effectiveness in reducing poverty? Working Paper No. 2012/54. UNU-WIDER, Helsinki.

    Google Scholar 

  • Drazen, A. 2000. Political economy in macroeconomics. Princeton: Princeton University Press.

    Google Scholar 

  • Epstein, G., and I. Gang. 2009. Good governance and good aid allocation. Journal of Development Economics 89(1): 12–18.

    Article  Google Scholar 

  • Hagen, R. 2006. Samaritan agents? On the strategic delegation of aid policy. Journal of Development Economics 79(1): 249–263.

    Article  Google Scholar 

  • Jones, C., O. Morrissey, and D. Nelson. 2011. Did the World Bank drive tariff reforms in eastern Africa? World Development 39(3): 324–335.

    Article  Google Scholar 

  • Koeberle, S. 2003. Should policy-based lending still involve conditionality? The World Bank Research Observer 18(2): 249–273.

    Article  Google Scholar 

  • Koeberle, S., H. Bedoya, P. Silarszky, and G. Verheyen (eds.). 2005. Conditionality revisited: Concepts, experiences and lessons. Washington, DC: World Bank.

    Google Scholar 

  • Malesa, T., and P. Silarszky. 2005. Does World Bank effort matter for success of adjustment operations? In Conditionality revisited: Concepts, experiences and lessons, ed. S. Koeberle et al., pp. 127–141. Washington, DC: World Bank.

    Google Scholar 

  • Martens, B., U. Mummert, P. Murrell, and P. Seabright. 2002. The institutional economics of foreign aid. Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Morrissey, O. 2004. Conditionality and aid effectiveness re-evaluated. The World Economy 27(2): 153–171.

    Article  Google Scholar 

  • Mosley, P., Harrigan, J., and Toye, J. 1991. Aid and power: The World Bank and policy-based lending (two volumes). London: Routledge.

    Google Scholar 

  • Rodrik, D. 1989. Promises, promises: Credible policy reform via signalling. Economic Journal 99: 756–772.

    Article  Google Scholar 

  • Svensson, J. 2000a. When is foreign aid policy credible? Aid dependence and conditionality. Journal of Development Economics 61(1): 61–84.

    Article  Google Scholar 

  • Svensson, J. 2000b. Foreign aid and rent-seeking. Journal of International Economics 51: 437–461.

    Article  Google Scholar 

  • Svensson, J. 2003. Why conditional aid does not work and what can be done about it? Journal of Development Economics 70(2): 381–402.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Editor information

Editors and Affiliations

Copyright information

© 2013 The Author(s)

About this entry

Cite this entry

Morrissey, O. (2013). Aid Conditionality. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_2871-1

Download citation

  • DOI: https://doi.org/10.1057/978-1-349-95121-5_2871-1

  • Received:

  • Accepted:

  • Published:

  • Publisher Name: Palgrave Macmillan, London

  • Online ISBN: 978-1-349-95121-5

  • eBook Packages: Springer Reference Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences

Publish with us

Policies and ethics