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http://hdl.handle.net/10419/41568
  
Title:Does conditionality work? A test for an innovative US aid scheme PDF Logo
Authors:Öhler, Hannes
Nunnenkamp, Peter
Dreher, Axel
Issue Date:2010
Series/Report no.:Discussion papers // CeGE 103
Abstract:Performance-based aid has been proposed as an alternative to the failed traditional approach whereby donors make aid conditional on the reform promises of recipient countries. However, hardly any empirical evidence exists on whether ex post rewards are effective in inducing reforms. We attempt to fill this gap by investigating whether the Millennium Challenge Corporation (MCC) was successful in promoting better control of corruption. We employ a difference-in-difference-in-differences (DDD) approach, considering different ways of defining the treatment group as well as different time periods during which incentive effects could have materialized. We find evidence of strong anticipation effects immediately after the announcement of the MCC, while increasing uncertainty about the timing and amount of MCC aid appear to weaken the incentive to fight corruption over time. We conclude that - if designed properly - conditionality can work.
Subjects:Foreign Aid
Corruption
Millennium Challenge Corporation
MCC Effect
JEL:F35
O17
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
cege-Diskussionspapiere, Universität Göttingen

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