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Buying Influence: Aid Fungibility in a Strategic Perspective

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Author Info
Rune Jansen Hagen

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Abstract

I study equilibria of non-cooperative games between an aid donor and a recipient when there is conflict over the allocation of their combined budgets. The general conclusion is that a donor's influence over outcomes is increasing in the share of the available resources it controls; if this share is large enough, aid fungibility is not important as the donor achieves its most preferred allocation. The game-theoretic approach to fungibility is contrasted with the traditional non-strategic approach. I argue that the former is superior as it derives final allocations instead of assuming them, making analysis of the sources of influence over outcomes possible. Copyright © 2006 The Author; Journal compilation © 2006 Blackwell Publishing Ltd.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9361.2006.00317.x
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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Development Economics.

Volume (Year): 10 (2006)
Issue (Month): 2 (05)
Pages: 267-284
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Handle: RePEc:bla:rdevec:v:10:y:2006:i:2:p:267-284

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  1. Sanjay Jain, 2007. "Project Assistance versus Budget Support: An Incentive-Theoretic Analysis of Aid Conditionality," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(4), pages 694-719, December. [Downloadable!] (restricted)
  2. Hagen, Rune Jansen, 2004. "Foreign Aid and Domestic Politics Implications for Aid Selectivity," Working Papers 04-12, Cornell University, Center for Analytic Economics. [Downloadable!]
  3. Gil S. Epstein & Ira N Gang, 2006. "The Hope for Hysteresis in Foreign Aid," Departmental Working Papers 200628, Rutgers University, Department of Economics. [Downloadable!]
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This page was last updated on 2009-11-22.


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