The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Aid Conditionality

  • Oliver Morrissey
Reference work entry


Aid conditionality refers to the practice of donors attaching conditions to enhance the effectiveness of aid. The donor’s prime objective is to reduce poverty, but recipients want to divert some of the aid to elites. This gives rise to two problems: adverse selection (aid does not go to the recipients who will make best use) and moral hazard (recipients can misuse the aid). The article reviews how aid conditionality can address these problems, and briefly considers empirical evidence.


Aid agencies Donors IMF Moral hazard Structural adjustment World Bank 

JEL Classification

O190 F330 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Oliver Morrissey
    • 1
  1. 1.