Birds of a Feather: Fiscal Conditionality and Recipient Country Ownership in Aid Allocation
29 Pages Posted: 23 Nov 2008
Date Written: November 20, 2008
This paper attempts to reconcile aid-conditionality and recipient country ownership of its development process as mutually compatible ingredients of aid effectiveness. To be effective, aid itself must contribute to the end of aid. For this happen, the recipient government must, in the meantime, develop a capacity for becoming financially self-reliant. However, even the government of a country that owns its development process does not necessarily have the incentive to become financially self-reliant when aid resources are available. Conditioning aid allocation to the recipient government's commitment to reach a prescribed tax revenue target may therefore help recipient countries gain from aid while weaning themselves from chronic dependence on it. We make these points using an endogenous growth model featuring domestic tax revenue and grant inflows as the mechanism for mitigating school user fees constraining education access in recipient countries.
Keywords: Development assistance, fiscal conditionality, school user fees, intertemporal
JEL Classification: D90, F35, H42, H52, I22, J24, O11
Suggested Citation: Suggested Citation