The Second Wave of Independence: Shopping for Solutions

20 Pages Posted: 20 Apr 2016

See all articles by Marie Gaarder

Marie Gaarder

Inter-American Development Bank (IDB); World Bank

Ulrich Bartsch

World Bank

Date Written: October 1, 2014

Abstract

In the 21st century, many developing countries will become emerging markets and will no longer be in need of the carrot-and-stick approach to development assistance most prevalent today: development financing made available conditional on certain policies and interventions. This paper suggests that interactions between development agencies and recipient governments are mostly about inputs deemed (but not known) to contribute to improvements in living standards in recipient countries, rather than outcomes. The paper argues that the development marketplace is beset by market imperfections because of externalities, principal-agent problems, and decision making under uncertainty, which not only make it difficult to achieve the right outcomes, but also take away incentives to learn about outcomes. A fundamental rethink of responsibilities and accountabilities in the development business would make sure that development outcomes are traded in the development marketplace. It would put recipient countries in charge of contracting development agencies to provide these outcomes. Development agencies would commit to and be held financially accountable for outcomes, that is, real improvements in welfare indicators. The paper describes the role of the evaluation function in aligning incentives with the ultimate goal of improving lives and provides examples of emerging solutions.

Keywords: External Debt, Economic Insecurity, Debt Markets

Suggested Citation

Gaarder, Marie and Bartsch, Ulrich, The Second Wave of Independence: Shopping for Solutions (October 1, 2014). World Bank Policy Research Working Paper No. 7069, Available at SSRN: https://ssrn.com/abstract=2513125

Marie Gaarder (Contact Author)

Inter-American Development Bank (IDB)

1300 New York Avenue NW
Washington, DC 20577
United States

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Ulrich Bartsch

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
22
Abstract Views
516
PlumX Metrics