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Foreign Aid in the Presence of Corruption: Differential Games among Donors

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  • Murray C. Kemp
  • Ngo Van Long

Abstract

We consider two dynamic games of foreign aid. Model 1 deals with the case where donor countries continually feel the warm glow from the act of giving. Model 2 postulates that donors will stop giving aid when a target level of development is reached. In Model 1 , there are multiple equilibria that can be Pareto ranked. In Model 2 , the equilibrium strategies are nonlinear functions of the level of development. The flow of aid falls at a faster and faster rate as the target is approached. An increase in corruption will increase the flow of aid. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 17 (2009)
Issue (Month): SI (05)
Pages: 230-243

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Handle: RePEc:bla:reviec:v:17:y:2009:i:si:p:230-243

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