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Reforming the Formula: A Modest Proposal for Introducing Development Outcomes in Ida Allocation Procedures

39 Pages Posted: 28 Jul 2005  

Ravi Kanbur

Cornell University; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: March 2005

Abstract

This paper develops a modest proposal for introducing final outcome indicators in the IDA aid allocation formula. It starts with a review of the current formula and the rationale for it. It is argued that this formula, and in particular the Country Policy and Institutional Assessment (CPIA) part of it, implicitly relies too heavily on a uniform model of what works in development policy. Even if this model were valid 'on average', the variations around the average make it an unreliable sole guide to the country-specific productivity of aid in achieving the final objectives of development. Rather, it is argued that changes in the actual outcomes on these final objectives could also be used as part of the allocation formula. A number of conceptual and operational objections to this position are considered and debated. The paper concludes that there is much to be gained by taking small steps in the direction of introducing outcome variables in the IDA formula, and assessing the experience of doing so in a few years' time.

Keywords: IDA, performance-based aid allocation

JEL Classification: O19

Suggested Citation

Kanbur, Ravi, Reforming the Formula: A Modest Proposal for Introducing Development Outcomes in Ida Allocation Procedures (March 2005). CEPR Discussion Paper No. 4971. Available at SSRN: https://ssrn.com/abstract=771636

Ravi Kanbur (Contact Author)

Cornell University ( email )

301-J Warren Hall
Ithaca, NY 14853
United States
607-255-7966 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://www.kanbur.dyson.cornell.edu

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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