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

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  • Kanbur, Ravi

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.

Suggested Citation

  • Kanbur, Ravi, 2005. "Reforming the Formula: A Modest Proposal for Introducing Development Outcomes in IDA Allocation Procedures," CEPR Discussion Papers 4971, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4971
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    References listed on IDEAS

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    More about this item

    Keywords

    Ida; Performance-based aid allocation;

    JEL classification:

    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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