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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.