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The Samaritan's Dilemma and the Effectiveness of Development Aid

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  • Karl Pedersen

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    Abstract

    Contributing to the alleviation of poverty in recipient countries is one of the main goals of most aid organizations. In this paper the following question is asked: could it be the case that altruistic aid organizations are counter-productive in the sense that their activities may cause the extent of poverty to increase or the relative income distribution to worsen? The answer is yes and the reason is simply that recipient governments adjust in order to qualify for aid. It is shown that if recipient governments perceive themselves as being engaged in a competition for aid and/or if the aggregate aid budget is endogenous, then the incentive problems may become particularly severe. Copyright Kluwer Academic Publishers 2001

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    File URL: http://hdl.handle.net/10.1023/A:1012839126094
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    Bibliographic Info

    Article provided by Springer in its journal International Tax and Public Finance.

    Volume (Year): 8 (2001)
    Issue (Month): 5 (November)
    Pages: 693-703

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    Handle: RePEc:kap:itaxpf:v:8:y:2001:i:5:p:693-703

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    Web page: http://www.springerlink.com/link.asp?id=102915

    Related research

    Keywords: aid; development; poverty;

    References

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    1. Lindbeck, Assar & Weibull, Jorgen W, 1988. "Altruism and Time Consistency: The Economics of Fait Accompli," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1165-82, December.
    2. Pedersen, Karl R, 1996. " Aid, Investment and Incentives," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(3), pages 423-38.
    3. Maizels, Alfred & Nissanke, Machiko K., 1984. "Motivations for aid to developing countries," World Development, Elsevier, vol. 12(9), pages 879-900, September.
    4. Trumbull, William N & Wall, Howard J, 1994. "Estimating Aid-Allocation Criteria with Panel Data," Economic Journal, Royal Economic Society, vol. 104(425), pages 876-82, July.
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    Cited by:
    1. J. Atsu Amegashie & Bazoumana Ouattara & Eric Strobl, 2007. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," Working Papers 0702, University of Guelph, Department of Economics and Finance.
    2. Blouin, Max & Pallage, Stéphane, 2009. "Addressing the food aid curse," Economics Letters, Elsevier, vol. 104(1), pages 49-51, July.
    3. Hagen, Rune Jansen, 2004. "Foreign Aid and Domestic Politics Implications for Aid Selectivity," Working Papers 04-12, Cornell University, Center for Analytic Economics.
    4. Torsvik, Gaute, 2005. "Foreign economic aid; should donors cooperate?," Journal of Development Economics, Elsevier, vol. 77(2), pages 503-515, August.
    5. Dalgaard, Carl-Johan, 2008. "Donor policy rules and aid effectiveness," Journal of Economic Dynamics and Control, Elsevier, vol. 32(6), pages 1895-1920, June.

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