Shortcuts and Signals: An Analysis of the Micro-level Determinants of Aid Allocation, with Case Study Evidence from Brazil
AbstractDoes the distribution of foreign development assistance depend on the organizational capacity of the recipient organization? I argue that employees at donor agencies seek signals of which recipients will implement aid most effectively, and use these signals to determine the destination of foreign aid on the micro level. Qualitative evidence gathered in the US and Brazil indicates the types of signals donors seek and recipients strive to transmit: signals of a recipient's professionalism, reputation, and sustainability. After developing a signaling game to derive the conditions under which these signals might be credible indicators of implementation effectiveness, I present quantitative evidence of aid recipient organizations in Brazil and score them on the three signals. Statistical tests confirm that organizations with higher levels of these signals are more likely to receive funding, suggesting that donors use these signals to determine the destination of development assistance. Copyright � 2006 The Author; Journal compilation � 2006 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Development Economics.
Volume (Year): 10 (2006)
Issue (Month): 2 (05)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669
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- Frot, Emmanuel & Santiso, Javier, 2009.
"Herding in Aid Allocation,"
SITE Working Paper Series
5, Stockholm Institute of Transition Economics, Stockholm School of Economics, revised 02 Oct 2009.
- Murshed, S. Mansoob, 2008. "On the Non-Contractual Nature of Donor-Recipient Interaction in Development Assistance," Working Paper Series RP2008/71, World Institute for Development Economic Research (UNU-WIDER).
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