The MCA Incentive Effect -- Good, Mostly

Lots of press lately about the MCA's "incentive effect" -- a term that, according to the MCC, has been coined to describe improvements in policy performance in countries that are either seeking to become eligible for MCC assistance, or have already been selected as eligible and are continuing the reform process. Worth checking out some of the examples listed on the MCC's fact sheet; see if you agree.Doug Johnson and Tristan Zajonc of Harvard agree, in their important new paper on the MCC's incentive effect on good governance. Well worth the read:

"Even though the MCC is still in its infancy, we find substantial evidence that countries respond to MCC incentives by improving their indicators. Controlling for general time trends, potential recipients of MCC funds improve 25 percent more indicators after the MCC was created than before it. While still to early to make a final assessment, a range of specifications yield similar results. We do not find any corresponding increase in growth rates. "

"Success stories like these show the MCA has indeed left its mark on the world even before substantial dollar amounts have been disbursed. The incentive effect—created by selecting only countries that have adopted and are adhering to good policies—has shown more results so far than the projects themselves; this is exactly what MCC was designed to do in the short and medium term. The longer-term success of MCC will be seen in the results of MCC-funded projects, an improvement in host country capacity, and growing familiarity with a new development paradigm."