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Payment by Results in Development Aid: All That Glitters Is Not Gold

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  • Paul Clist

Abstract

Payment by Results (PbR), where aid is disbursed conditional upon progress against a pre-agreed measure, is becoming increasingly important for various donors. There are great hopes that this innovative instrument will focus attention on ultimate outcomes and lead to greater aid effectiveness by passing the delivery risk on to recipients. However, there is very little related empirical evidence, and previous attempts to place it on a sure conceptual footing are rare and incomplete. This article collates and synthesises relevant insights from a wide range of subfields in economics, providing a rich framework with which to analyze Payment by Results. I argue that the domain in which it dominates more traditional forms is relatively small and if it is used too broadly, many of the results it claims are likely to be misleading. The likelihood of illusory gains stems from the difficulty of using a single indicator to simultaneously measure and reward performance: ‘once a measure becomes a target, it ceases to be a good measure.’ This does not mean PbR should not be used (indeed it will be optimal in some settings), but it does mean that claims of success should be treated with caution.

Suggested Citation

  • Paul Clist, 2016. "Payment by Results in Development Aid: All That Glitters Is Not Gold," The World Bank Research Observer, World Bank, vol. 31(2), pages 290-319.
    • Handle: RePEc:oup:wbrobs:v:31:y:2016:i:2:p:290-319.
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    File URL: http://hdl.handle.net/10.1093/wbro/lkw005
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    Cited by:

    1. Fischer, A.M., 2017. "Dilemmas of externally financing domestic expenditures: Rethinking the political economy of aid and social protection through the monetary transformation dilemma," ISS Working Papers - General Series 629, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    2. Maren Duvendack, 2022. "Payment‐by‐results for health interventions in low‐ and middle‐income countries: A critical review," Development Policy Review, Overseas Development Institute, vol. 40(1), January.
    3. Gugelev, Alice & Gungadurdoss, Avnish & Lee, Jared & Sedlmayr, Richard & Stumpf, Andrea Emily, 2019. "Conceptualizing Fiduciary Structures That Create Demand For Development Outcomes," SocArXiv 7cdsn, Center for Open Science.
    4. Sedlmayr, Richard, 2018. "Rewarding Poverty Alleviation: A Case Study in Payment-by-Results," SocArXiv hdr78, Center for Open Science.
    5. Brendan Whitty & Jessica Sklair & Paul Robert Gilbert & Emma Mawdsley & Jo‐Anna Russon & Olivia Taylor, 2023. "Outsourcing the Business of Development: The Rise of For‐profit Consultancies in the UK Aid Sector," Development and Change, International Institute of Social Studies, vol. 54(4), pages 892-917, July.
    6. Ivica Petrikova & Melita Lazell, 2022. "“Securitized” UK aid projects in Africa: Evidence from Kenya, Nigeria and South Sudan," Development Policy Review, Overseas Development Institute, vol. 40(1), January.
    7. Tomiwa S. Adebayo & Demet B. Kalmaz & Abraham A. Awosusi, 2024. "Wavelet analysis of the foreign aid and economic growth nexus in Turkey," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 53(2), July.

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