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Strategic Interaction, Aid Effectiveness And The Formation Of Aid Policies In Donor Nations

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  • S. Mansoob Murshed

    (Utrecht School of Economics and the Institute of Social Studies, Utrecht University)

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    Abstract

    This paper examines some of the issues associated with the aid donor process arising from the theory of agency or principal-agent models and endogenous policy determination. The principals may be viewed as legislators and the agents as the aid agency. In addition to adverse selection and moral hazard the paper considers intrinsic sources of motivation for agents and the trade-off between adverse selection and moral hazard. It also considers multiple task agents, and situations where there are many principals with divergent objectives. The principals might be better off by making the tasks more complementary and trading in their differing objectives. The paper also considers the determinants of sustaining compromise over aid policies when different political factions in donor nations have competing interests with regard to recipients or overall aid strategy.

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    File URL: http://www.jed.or.kr/full-text/28-1/Murshed.PDF
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    Bibliographic Info

    Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

    Volume (Year): 28 (2003)
    Issue (Month): 1 (June)
    Pages: 189-203

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    Handle: RePEc:jed:journl:v:28:y:2003:i:1:p:189-203

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    Related research

    Keywords: Aid Effectiveness; Political Processes; Endogenous Policy Formation;

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    References

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    1. Svensson, Jakob, 1998. "Foreign aid and rent-seeking," Policy Research Working Paper Series 1880, The World Bank.
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    Cited by:
    1. 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).
    2. Murshed, S. Mansoob, 2004. "Strategic interaction and donor policy determination," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 311-323.

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