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Buying Influence: Aid Fungibility in a Strategic Perspective

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  • Rune Jansen Hagen

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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Bibliographic Info

Article provided by Wiley Blackwell 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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Cited by:
  1. Nordtveit, Ingvild, 2014. "Does better governance and commitment to development attract general budget support?," Working Papers in Economics 02/14, University of Bergen, Department of Economics.
  2. Almuth Scholl, 2013. "Debt Relief for Poor Countries: Conditionality and Effectiveness," Working Paper Series of the Department of Economics, University of Konstanz 2013-23, Department of Economics, University of Konstanz.
  3. 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.
  4. Paul Clist & Alessia Isopi & Oliver Morrissey, 2012. "Selectivity on aid modality: Determinants of budget support from multilateral donors," The Review of International Organizations, Springer, vol. 7(3), pages 267-284, September.
  5. Hagen, Rune Jansen, 2004. "Foreign Aid and Domestic Politics Implications for Aid Selectivity," Working Papers 04-12, Cornell University, Center for Analytic Economics.
  6. Gil S. Epstein & Ira N Gang, 2006. "The Hope for Hysteresis in Foreign Aid," Departmental Working Papers 200628, Rutgers University, Department of Economics.

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