Foreign Aid and Recurrent Cost: Donor Competition, Aid Proliferation, and Budget Support
AbstractRecent empirical studies reveal that effectiveness of aid on growth is ambiguous. The authors consider aid proliferation-excess aid investment relative to recurrent cost-as a potential cause that undermines aid effectiveness, because aid projects can only produce sustainable benefits when sufficient recurrent costs are disbursed. They consider the donor's budget support as a device to supplement the shortage of the recipient's recurrent cost and to alleviate the misallocation of inputs. However, when donors have self-interested preferences for the success of their own projects over those conducted by others, they provide insufficient budget support relative to aid, which results in aid proliferation. Moreover, aid proliferation is shown to be worsened by the presence of more donors. Copyright � 2009 The Authors. Journal compilation � 2009 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Development Economics.
Volume (Year): 13 (2009)
Issue (Month): 2 (05)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669
Other versions of this item:
- ARIMOTO Yutaka & KONO Hisaki, 2007. "Foreign Aid and Recurrent Cost: Donor Competition, Aid Proliferation and Budget Support," Discussion papers 07051, Research Institute of Economy, Trade and Industry (RIETI).
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