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Principals, Agents And The Failings Of Conditionality

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  • TONY KILLICK

    (Senior Research Fellow, Overseas Development Institute, London, UK)

Abstract

This article examines the effectiveness of policy conditionality by international and other aid donors. The subject is treated within a principal-agent framework and is based on evidence from a sample of 21 developing countries, mainly relating to experiences with World Bank structural adjustment programmes. The evidence provides strong support for the overall hypothesis that conditionality-applying donors (specifically the BWIs) are often unable to put in place a system of rewards and punishments sufficient to overcome the frequent perceived conflicts of interest between themselves and recipient governments. Difficulties which donors experience in punishing non-implementation of policy stipulations are among the chief reasons for this result. In the event of serious donor-recipient disagreements, domestic politics usually dominates. The use of donor financial leverage is not a substitute for weak domestic institutions or 'political will'. We also find that the conditions necessary for conditionality to provide a 'technology of precommitment' are often not satisfied. The BWIs and other donors should recognize that their main contribution to policy reform in developing countries has been through influence on the contemporary intellectual climate, and persuasion of governments through regular contacts. © 1997 by John Wiley & Sons, Ltd.

Suggested Citation

  • Tony Killick, 1997. "Principals, Agents And The Failings Of Conditionality," Journal of International Development, John Wiley & Sons, Ltd., vol. 9(4), pages 483-495.
    • Handle: RePEc:wly:jintdv:v:9:y:1997:i:4:p:483-495
    DOI: 10.1002/(SICI)1099-1328(199706)9:4<483::AID-JID458>3.0.CO;2-S
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    1. Johnson, J.H. & Wasty, S.S., 1993. "Borrower Ownership of Adjustment Programs and the Political Economy of Reform," World Bank - Discussion Papers 199, World Bank.
    2. Bouton, Lawrence & Jones, Christine & Kiguel, Miguel, 1994. "Macroeconomic reform and growth in Africa : adjustment in Africa revisited," Policy Research Working Paper Series 1394, The World Bank.
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    Cited by:

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    3. Tito Cordella & Giovanni Dell'Aricca, 2002. "Limits of Conditionality in Poverty Reduction Programs," IMF Staff Papers, Palgrave Macmillan, vol. 49(Special i), pages 68-86.
    4. Kletzer, Kenneth, 2005. "Aid and Sanctions," Santa Cruz Department of Economics, Working Paper Series qt5hq5d9gp, Department of Economics, UC Santa Cruz.
    5. Molenaers, Nadia & Dellepiane, Sebastian & Faust, Jorg, 2015. "Political Conditionality and Foreign Aid," World Development, Elsevier, vol. 75(C), pages 2-12.
    6. Alessia Isopi & Fabrizio Mattesini, 2009. "Good Donors or Good Recipients? A Repeated Moral Hazard Model of Aid Allocation," Discussion Papers 09/10, University of Nottingham, CREDIT.
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    8. Lodewijk Smets & Stephen Knack & Nadia Molenaers, 2013. "Political ideology, quality at entry and the success of economic reform programs," The Review of International Organizations, Springer, vol. 8(4), pages 447-476, December.
    9. Arjan de Haan & Ward Warmerdam, 2012. "The politics of aid revisited: a review of evidence on state capacity and elite commitment," Global Development Institute Working Paper Series esid-007-12, GDI, The University of Manchester.
    10. Elisabeth Paul, 2006. "A Survey of the Theoretical Economic Literature on Foreign Aid," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 20(1), pages 1-17, May.
    11. Ashok Chakravarti, 2012. "Institutions, Economic Performance and the Visible Hand," Books, Edward Elgar Publishing, number 14751.
    12. Leandro, Jose E. & Schafer, Hartwig & Frontini, Gaspar, 1999. "Towards A More Effective Conditionality: An Operational Framework," World Development, Elsevier, vol. 27(2), pages 285-300, February.
    13. Hackenesch, Christine, 2015. "It’s Domestic Politics, Stupid! EU Democracy Promotion Strategies Meet African Dominant Party Regimes," World Development, Elsevier, vol. 75(C), pages 85-96.
    14. Angelsen, Arild, 2013. "REDD+ as Performance-Based Aid: General Lessons and Bilateral Agreements of Norway," WIDER Working Paper Series 135, World Institute for Development Economic Research (UNU-WIDER).
    15. Dafe, Florence, 2018. "Fuelled power: oil, financiers and central bank policy in Nigeria," LSE Research Online Documents on Economics 89610, London School of Economics and Political Science, LSE Library.
    16. Arild Angelsen, 2017. "REDD+ as Result-based Aid: General Lessons and Bilateral Agreements of Norway," Review of Development Economics, Wiley Blackwell, vol. 21(2), pages 237-264, May.
    17. Oliveira Cruz, Valeria & McPake, Barbara, 2010. "The "aid contract" and its compensation scheme: A case study of the performance of the Ugandan health sector," Social Science & Medicine, Elsevier, vol. 71(7), pages 1357-1365, October.
    18. Omotunde E.G. JOHNSON, 2005. "Country Ownership Of Reform Programmes And The Implications For Conditionality," G-24 Discussion Papers 35, United Nations Conference on Trade and Development.
    19. Elena V McLean, 2015. "A strategic theory of international environmental assistance," Journal of Theoretical Politics, , vol. 27(2), pages 324-347, April.
    20. Howard White, 1998. "British aid and the White Paper on International Development: dressing a wolf in sheep's clothing in the emperor's new clothes?," Journal of International Development, John Wiley & Sons, Ltd., vol. 10(2), pages 151-166.
    21. Arild Angelsen, 2013. "REDD+ as Performance-Based Aid: General Lessons and Bilateral Agreements of Norway," WIDER Working Paper Series wp-2013-135, World Institute for Development Economic Research (UNU-WIDER).
    22. Peter Moll & Lodewijk Smets, 2020. "Is It the Journey That Matters? A Fresh Look at the Impact of World Bank Policy Lending," Journal of International Development, John Wiley & Sons, Ltd., vol. 32(7), pages 1194-1228, October.
    23. José Antonio Alonso & Carlos Garcimartín, 2011. "El impacto de la ayuda internacional sobre la calidad de las instituciones," EKONOMIAZ. Revista vasca de Economía, Gobierno Vasco / Eusko Jaurlaritza / Basque Government, vol. 77(02), pages 158-175.

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