When Does Aid Conditionality Work?

Does aid conditionality—the setting of policy goals in exchange for access to aid—promote reform? Many studies on the impact of aid and reform suggest not. However, few explicitly examine whether the impact of aid on reform is mediated by recipient regime type. I argue that conditional aid is effective but its efficacy depends on recipient countries’ level of democracy because the value of aid to governments depends on the degree to which it helps them maintain power, and recent work shows that the marginal impact of aid on political survival increases with level of democracy. I test this argument on data from 68 countries over the period from 1980 to 1999. I focus on the impact of IMF and World Bank aid on fiscal reform, one of the most commonly stipulated conditions in aid-for-policy arrangements. I find that aid from the Bretton Woods institutions promotes fiscal reform, but only in more democratic countries.     

From democratic socialism to neoliberalism: the metamorphoses of the people's national party in Jamaica

Why are leftist parties in government abandoning their state-led, redistributive economic development models in favor of market-determined neoliberal ones? Conventional explanations emphasize conditionality of international financial institutiosn. This argument, though, fails to account for differences in economic policy choices across countries or within a country over time. Analyzing the social democratic People's National Party of Jamaica during two periods when it accepted IMF-mandated neoliberal economic reform measures (1977–80 and 1989-present), an alternative approach is presented to illuminate why and how leftist governments switch economic policy programs. The two time periods show that IMF conditionality might be a necessary motivation for the adoption of neoliberal economic measures, but it is not sufficient motivation. I argue that the actual policies the PNP governments employed reflect changes in the relative influence of competing factions within the party. This approach, focusing on domestic actors rather than international ones to account for economic policy shifts, highlights the ways in which politicians can manipulate institutional rules to change the relative weight of different factions within the party to gain support for policy decisions that contradict the party's traditional social democratic ideology.     

Legacies and Leverage: EU Political Conditionality and Democracy Promotion in Historical Perspective

Previous studies have established strong and robust effects of EU political conditionality on democracy in the neighbouring countries. We test these effects against the claim that historical legacies condition the likelihood of successful democratisation—and possibly the EU's political conditionality as well. Based on a panel study of 36 countries of the Eastern and Mediterranean neighbourhood of the EU between 1988 and 2004, we show that cultural legacies of religious civilisation are indeed conducive to or inhibit democratisation, and reduce the effects of political conditionality, but they do not explain away the EU's role in promoting democratic consolidation.     

Does Conditionality Mitigate the Potential Negative Effect of Aid on Revenues?

Abstract

This paper assesses whether conditionality in IMF-supported programmes has helped offset the potential negative effect of foreign aid on tax revenues. The analysis – carried out on panel data covering 1993-2012 for 111 low- and middle-income countries – shows that growing use of revenue conditionality by low-income countries partially offsets the depressing effect of foreign grants on tax revenue, particularly on taxes on goods and services. The impact of conditionality is strong in countries where aid dependence is high and where institutions are strong, suggesting that revenue conditionality cannot substitute for weak institutions in mitigating any negative effect of aid on tax revenue collection.     

Cherry Picking EU Conditionality: Selective Compliance in Georgia’s Hybrid Regime

This article investigates the rationale behind compliance and non-compliance with EU conditionality in Georgia’s hybrid regime. Following the literature on competitive authoritarianism, it argues that the survival strategies of hybrid regime incumbents compel them to dodge conditionality in those policy areas that are crucial for maintaining the uneven political playing field. On the other hand, specific self-preservation tactics dictate that they should embrace neighbourhood Europeanisation in policy domains capable of generating votes. Taken together, these hypotheses alert us to the possibility that hybrid regime governments in the European Neighbourhood Policy (ENP) countries are cherry picking conditionality.     

The European Neighbourhood Policy: Conditionality Revisited for the EU's Eastern Neighbours

The European Neighbourhood Policy (ENP) is modelled on the institutional and procedural experience of the EU's eastward enlargement, although it explicitly excludes a membership perspective. It thus aims to define an alternative incentive for domestic reform in neighbouring countries, referred to as ‘a stake in the internal market’. This article suggests that the ENP amounts to a form of ‘conditionality-lite’ for non-candidate countries. Within the ENP the key defining elements of conditionality—clear incentive and enforcement structures—are vague for both the EU and its neighbouring countries. Thus, the ENP is conceptually and empirically weak when measured against a simple, rationalist conditionality model. In line with the alternative understanding of conditionality as a process rather than a clear-cut variable, the main function of the ENP is twofold: it provides an external reference point which domestic political actors in the ENP countries can choose to utilise when it fits their agenda (both pro-EU or anti-EU); and a loose framework for socialisation. This process of socialisation involves both the EU and the ENP countries. Through an analysis of the ENP process in Ukraine and Moldova it concludes that while the ENP tries to prevent a repeat of the EU's ‘rhetorical entrapment’ in further eastward enlargement, it paradoxically paves the way for a ‘procedural entrapment’ in ENP countries that harbour membership aspirations and provides a momentum, though not a guarantee, for conflict resolution.     

CENTRAL GOVERNMENT BUDGET PRACTICES AND TRANSPARENCY: AN INTERNATIONAL COMPARISON

From an international perspective, a relationship between public sector transparency and better economic and social outcomes is something that is increasingly acknowledged. In terms of lack of transparency in budget reports both bureaucratic model and fiscal illusion theory have been argued as explanations. To assess transparency in budget practices we analyse to what extent a sample of 41 countries are meeting OECD requirements according to its Best Practices for Budget Transparency document (OBP). We find an average OBP fulfilment of 56.4 per cent. Transparency is negatively correlated with corruption and positively correlated with economic development. Countries receiving external financial and technical support meet fewer OBP recommendations than countries not receiving it. Considering the political framework, both progressive and conservative governments reach similar transparency levels. OECD members do not significantly fulfil more OBP suggestions than non‐members. In respect of 4 variables: transparency, corruption, democracy and development, four clusters of countries arise: top‐performing, low transparency‐developed, low transparency‐developing and worst‐performing.     

The Electoral Dynamics of Human Development

This paper analyses the impact of elections, partisan and political support effects on the dynamics of human development in a panel of 82 countries over the period 1980–2013. A Generalised Method of Moments(GMM) estimator is employed and the results point out to the presence of an electoral cycle in the growth rate of human development. Majority governments also influence it, but no evidence is found regarding partisan effects. The electoral cycles have proved to be stronger in non-OECD countries, in countries with less frequent elections, with lower levels of income and human development, in presidential and non-plurality systems and in proportional representation regimes.     

Securing the Only Game in Town: The EU's Political Conditionality and Democratic Consolidation in Post-Soviet Latvia

The state of democracy in post-communist Europe has been subject to some debate in recent years; but it needs to take account of longer-term trends. The focus here is on how far the EU's political conditionality has contributed to democratic consolidation using an in-depth case study of post-Soviet Latvia. The record of the impacts of conditionality up to EU entry is examined and then attention turns to whether post-accession tendencies have demonstrated any significant changes after the end of Brussels' monitoring. Using a comparative framework, this article shows that the outcome after four years of EU membership is mixed with both positive and negative results. It is concluded that there is no automatic locking-in effect of European integration; and that conditionality assists democratic consolidation more in structural than in attitudinal or behavioural terms.     

How Concessional is Aid Lending?

The method used by Development Assistance Committee countries for measuring the concessionality of aid loans has remained unchanged for nearly 20 years. It was designed to measure the net cost of aid to donors not the net benefit to recipients. The discount rate used takes no account of changes in the value of the currency of the loan or of changes in prices for goods traded by recipient countries. Furthermore, it does not consider the implications of tying of aid or of policy conditionality. This paper suggests an alternative measure that shows the real net benefit of aid finance to recipients. It argues that the discount rate used by the Development Assistance Committee is too high and that changes in the value of the currency in which a loan is taken out can be important. Nevertheless, real rates of interest for developing countries remain surprisingly high despite low nominal rates due to falling prices of traded goods. This finding has implications for the future real cost of debt service to recipients.     

Latin America's Left Turns: beyond good and bad

In rapid succession leftwing parties have been elected to government in some of the most important countries in the Latin American region. I challenge the view that there are two distinct variants of the left—one populist, the other social democratic—and argue that variation on the left reflects the diverse conditions under which these forces emerge and evolve. I outline common features shared by the left in Latin America; suggest how the concept of populism and analysis of social movements can help explain this variation; and show how the left's commitment to egalitarianism, balancing markets, and, in some cases, its appeals to the constituent power of the people enabled it to benefit from disillusionment with the results of neoliberalism, the poor performance of democratic governments in Latin America, and the evolving international context.     

Responding to Terrorism? Human Rights Organization Shaming and Terrorist Attacks

Why do Human Rights Organizations (HROs) target or “shame” countries for human rights abuses? The literature using country-level factors to explain why one country is likely to be targeted over another is growing but many questions still remain. Terrorist activity in a country should have a positive effect on the amount of shaming directed at a country. HROs are in the publicity business and have organizational interests to shame states already receiving attention. Findings show that there is a connection between certain types of transnational terrorist incidents occur in a country and the amount of HRO shaming of governments, even after accounting for the human rights practices within the state.     

Gender-responsive budgeting: A budget reform to address gender inequity

In recognition of gender inequities, more than 80 countries have applied a gender perspective to their budget process, initiatives referred to as gender-responsive budgeting (GRB). Research on GRB initiatives has focused on whether they reduce gender inequities. However, if it is to have a lasting effect, GRB must reform the budget process and become integral to government administrative routines. We examine the experiences of several countries with GRB initiatives and identify the key factors explaining implementation success or failure. We find that these factors are similar to those that explain the success of earlier budget reforms focused on efficiency and effectiveness. While the equity objective of GRB differentiates it from other budget reforms, these factors provide the context for understanding GRB initiatives. Although gender parity is just one dimension of social equity, the success of GRB initiatives shows that governments can use their budgets to meet social equity objectives.     

Inequality and Support for Political Engagement in New Democracies

Existing studies of income inequality and political participation—including related literature, for example, on preferences for redistribution—leave us with the question of whether citizens see political democracy as offering ways to challenge market inequalities. Using original surveys in 13 Central and Eastern European countries, I find that those who see high and undesirable levels of income inequality have stronger demands for popular democratic participation than those who do not. In addition, neither the aggregate levels of support for political engagement nor individuals’ perceptions of inequality are coordinated with either national-level indicators of income inequality or democratic performance.     

Incoherence between Tax and Development Policies: the case of the Netherlands

Abstract

This article discusses incoherence between tax and development policies, a relatively new area in the debate on policy coherence for development, using a case study of the Netherlands. Dutch business entities play a key role in tax avoidance structures of multinational corporations. We argue that the Dutch tax regime facilitates the avoidance of substantial amounts of tax revenues in developing countries when compared to the Dutch aid budget. As domestic tax revenues are an important source of financing for development, this suggests that the Dutch tax policy is incompatible with the Dutch policy on development co-operation. The lack of policy coherence is largely unintended but it has structural and political causes.     

Political Consensus and Fiscal Outcomes

It is becoming difficult to maintain consensus in a period of economic austerity, and this possibly challenges the ability of democratic institutions to take decisions on tough economic questions. In order to find out how political consensus influences fiscal outcomes, this article sets out to analyse the association between political consensus and public expenditure growth. The results show that political consensus is positively associated with both budgeted and actual expenditure growth, but also negatively associated with budget overruns. This indicates that political consensus comes at a cost, while at the same time politicians may be better at sticking to budgets if political consensus exists. The analysis is based on a pooled regression analysis of the local governments in Denmark in the years 2008 and 2009 using a data set combining survey data with administrative data on the local governments.     

Chinese Intergovernmental Relations and World Development: Origins and Impacts of Chinese Export Credits

Generously offering loans for development projects around the world, China has recently brought them to Eastern Europe, namely to Belarus. By reviewing relevant development literature and using Belarus as a case study, this article contributes to the debate on China’s emergence as a source of investment and aid. It addresses four concerns: the tools used by China, the driving forces behind proactive investing behavior, the advantages and disadvantages for a recipient country, and the conditionality attached. The article demonstrates that Chinese export credits resolve a latent conflict of interests between the central and local governments by transferring Chinese businesses abroad. Meanwhile, the borrowers have to deal with extra costs, for instance, high expenses to maintain final facilities or the cost of Chinese labor adaptation. In Belarus, the situation is exacerbated by the language barrier and a general anxiety of the local population derived from the lack of experience with foreigners.     

The IMF and the mobilisation of foreign aid

Particularly in the context of the Millennium Development Goals, there has been much discussion of the association between the International Monetary Fund and bilateral aid flows. What role should the Fund be playing in helping to achieve the MDGs? Some observers have suggested that the Fund should seek to reduce its role in poor countries and should be minimising its own lending. They see aid donors taking on a larger role and present the IMF and aid donors as substitutes. Others envisage a much bigger lending role for the Fund. This may hint at complementarities. Although this discussion raises important policy issues there are very few studies that examine the relationship empirically. This paper attempts to help fill this gap. It explores the extent to which the IMF has had a catalytic effect on Official Development Assistance and the potential channels through which catalysis might work. It finds strong evidence of a positive association and suggests that this may have more to do with conditionality than with the provision of IMF resources. But it may not represent catalysis in the conventional sense. There is a synergy between the IMF and bilateral aid that may yet be more fully developed and exploited.     

Democracy,confusion, or chaos: Political conditionality in Kenya

We argue that the policy of conditioning all economic development aid on a process of democratization is a mistake. Good economic policy should be rewarded for its own sake. The process of democratization is costly to participants, and forcing it prematurely can lead to institutional collapse rather than development. Unclear definition of political conditionality has made donor policies inconsistent and capricious. We make these arguments conceptually and then review the experience of one of the most explicit cases of conditionality-induced “democratization”—Kenya. An aid cutoff stimulated the government to hold multiparty elections for the first time in many years. Despite the apparent success, the human and economic costs have been high, and the political changes less than donors hoped.     

Citizen Participation in Local Policy Making: Design and Democracy

Embedding democratic innovations that increase and deepen citizen participation in decision making has become a common policy of local governments in many countries. This article focuses on the role of the design of these innovations and seeks to establish the effects of their design on democracy. The article evaluates 20 cases of participatory governance and 19 deliberative forums. The findings show that different designs produce different democratic effects, but also that the suitability of a particular design depends on the type of policy issue. Tensions between representative and direct democracy are more likely to exist for participatory governance than for deliberative forums.