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Title: Reputation concerns in aid conditionality
Authors: Berlinschi, Ruxanda # ×
Issue Date: 16-Mar-2010
Publisher: Springer New York LLC
Series Title: The Review of International Organizations vol:5 pages:433-459
Abstract: This paper analyzes the conditions under which reputation concerns
induce donors and recipients to respect conditional aid contracts. Donors enforce
conditionality if the benefits of improving compliance in future contracts thanks to a
tougher reputation exceed the costs of resisting disbursement pressure. The level of
conditionality enforcement is optimal if all the costs and benefits of reputation
building are internalized by the decision maker. This condition is not satisfied at the
World Bank and the IMF, where enforcement is decentralized to country departments
which do not internalize the benefits of a tough reputation on other
departments. Recipients comply with conditionality if the costs of implementing
conditionality are lower than the benefits of securing tranche release thanks to
compliance and obtaining future contracts thanks to a good reputation for
compliance. Reputation concerns increase recipients’ incentives to comply only if
there is some uncertainty on future aid commitments, which is true for successive
single-tranche contracts, but not for multi-tranche contracts.
ISSN: 1559-7431
Publication status: published
KU Leuven publication type: IT
Appears in Collections:LICOS - Centre for Institutions and Economic Performance, Leuven
× corresponding author
# (joint) last author

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