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dc.contributor.authorScholl, Almuthen_US
dc.description.abstractThis paper analyzes optimal foreign aid policy in a neoclassical framework with a conflict of interest between the donor and the recipient government. Aid conditionality is modelled as a limited enforceable contract. We define conditional aid policy to be self-enforcing if, at any point in time, the conditions imposed on aid funds are supportable by the threat of a permanent aid cutoff from then onward. Quantitative results show that the effectiveness of unconditional aid is low while self-enforcing conditional aid strongly stimulates the economy. However, increasing the welfare of the poor comes at high cost: to ensure aid effectiveness, less democratic political regimes receive permanently larger aid funds.en_US
dc.publisherSFB 649, Economic Risk Berlinen_US
dc.relation.ispartofseriesSFB 649 discussion paper 2005,054en_US
dc.titleAid effectiveness and limited enforceable conditionalityen_US
dc.typeWorking Paperen_US
Appears in Collections:SFB 649 Discussion Papers, HU Berlin

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