Location of Repository

Project Aid or Budget Aid? The Interests of Governments and Financial Institutions

By Carsten Hefeker


The paper compares different aid policy instruments and their effect on the target group. Starting from a situation where interest groups compete for the resources of the government, international financial institutions aim to change the policy outcome. They can either directly support one group or condition their financial help to the government on its policy. Apart from a normative analysis which policy is more adequate to help one group, the paper also asks what happens if the IFI is driven by bureaucratic self-interest, and whether this distort policies. --aid policy,conditionality,international financial institutions,interest groups

OAI identifier:

Suggested articles



  1. (2000). Who Gives Aid to Whom and Why?,
  2. (2003). Contracting for Aid,
  3. (1996). Politics and the Effectiveness of Aid,
  4. (2003). Budget Support Versus Project Aid, IMF Working Paper 03/88.
  5. (2000). Political Economy in Macroeconomics,
  6. (2004). Independent Actor or Agent? An Empirical Analysis of the Impact of US Interests on IMF Conditions, Paper prepared for HWWAconference.
  7. (2001). The Elusive Quest for Growth,
  8. (2002). The Cartel of Good Intentions: Bureaucracy versus markets in foreign aid,
  9. (2005). What Did Structural Adjustment Adjust? The Association of Policies and Growth With Repeated IMF and World Bank Adjustment Loans,
  10. (2004). World Bank Independence: A Model and Statistical Analysis of US Influence, Paper prepared for HWWA-conference.21 Grossman, Gene and Elhanan Helpman
  11. (2003). Can Process Conditionality Enhance Aid Effectiveness? The Role of Bureaucratic Interest and Public Pressure,
  12. Sajal and Pascalis Raimondos-Møller (2000a) Lobbying By Ethnic Groups and Aid Allocation,
  13. Sajal and Pascalis Raimondos-Møller (2000b) Special Interest Politics and Aid Fungibility,
  14. (1996). Power, Growth and the Voracity Effect,
  15. (2002). Vested Interests in a Positive Theory of IFI Conditionality,
  16. (1997). The Positive Theory of Public Bureuacracy, in Dennis Mueller (ed): Perspectives on Public Choice, Cambridge:
  17. (1971). Bureaucracy and Representative Government,
  18. (2004). Gustavo Canavire and Luis Triveno
  19. (2000a) Foreign Aid and Rent-Seeking,
  20. (2000b) When Is Foreign Aid Policy Credible? Aid Dependence and Conditionality,
  21. (2003). Why Conditional Aid Does Not Work and What Can Be Done About It?,
  22. (1991). The Political Economy of the International Monetary Fund: A Public Choice Analysis, in Vaubel, Roland and Thomas Willet (eds): The Political Economy of International Organizations,
  23. (1998). Assessing Aid,

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.