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This Systematic Country Diagnostic analysis of growth, structural transformation, poverty reduction, and inclusion suggest that Rwanda will need to target the following outcomes to maintain rapid progress toward poverty reduction and shared prosperity: - a shift to a productivity-led growth through structural transformation, supported by increased agricultural productivity, agglomeration, and rural-to-urban transition; - an increase in the growth elasticity of poverty for inclusive growth by investing in human capital, promoting private entrepreneurship, improving accountability for service delivery, and addressing vulnerability; - increased sustainability through addressing environmental degradation, building resilience to climate change, and maintaining debt sustainability.

Climate Change --- Genocide --- Human Capital --- Official Development Assistance --- Productivity

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This paper shows that the increased policy-selectivity of aid allocations observed in recent years provides recipient countries an incentive to improve policies. The paper estimates that a change in the World Banks Country Policy and Institutional Assessment policy index from 1.5 to 2 for a recipient is associated with an increase of about 13 percent in aid. The analysis also finds a modest but statistically significant positive relationship between the share of policy-selective aid in the global aid budget and policy, suggesting that policy-selective aid improves policies. This effect is properly identified, as the share of policy-selective aid in the global aid budget is exogenous to recipient country policy choices. Furthermore, the paper provides a game theoretic model that establishes the link between the policy-selectivity of the global budget and better recipient country policies in equilibrium.

Aid Policy --- Country Policy --- Development Economics and Aid Effectiveness --- Donor Conditionality --- Economic Policy, Institutions and Governance --- Governance --- Inequality --- Institutional Assessment --- Macroeconomics and Economic Growth --- National Governance --- Official Development Assistance --- Poverty Reduction --- Social Protections and Assistance