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Company Influence on Foreign Aid Disbursement: Is Conditionality Credible when Donors Have Mixed Motives?

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  • Espen Villanger

    ()
    (Chr. Michelsen Institute)

Abstract

When donors enforce conditionality upon recipients who do not implement the conditions, companies can suffer from cancellation of their contracts with the recipient when aid dries up. A strategic recipient may avoid implementing controversial conditions by only granting a contract to a company that puts pressure on the donor to keep aid flowing. In our model, each of these three agents takes account of each of the two other agents' actions. We show that this triadic structure can be crucial when explaining recipients' use of companies to influence donors to give aid unconditionally, and we offer a time-consistent explanation for the failure of conditionality.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 71 (2004)
Issue (Month): 2 (October)
Pages: 334-351

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Handle: RePEc:sej:ancoec:v:71:2:y:2004:p:334-351

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Web page: http://www.southerneconomic.org/
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  1. Svensson, Jakob, 1997. "When is foreign aid policy credible : aid dependence and conditionality," Policy Research Working Paper Series 1740, The World Bank.
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  11. Odd-Helge Fjeldstad, 2002. "Fighting fiscal corruption: The case of the Tanzania Revenue Authority," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2002:3, CMI (Chr. Michelsen Institute), Bergen, Norway.
  12. Trumbull, William N & Wall, Howard J, 1994. "Estimating Aid-Allocation Criteria with Panel Data," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 104(425), pages 876-82, July.
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Citations

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Cited by:
  1. Odd-Helge Fjeldstad & Florida Henjewele & Geoffrey Mwambe & Erasto Ngalewa & Knut Nygaard, 2004. "Local government finances and financial management in Tanzania," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2004: 7, CMI (Chr. Michelsen Institute), Bergen, Norway.
  2. Espen Villanger, 2003. "Company interests and foreign aid policy: Playing donors out against each other," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2003:5, CMI (Chr. Michelsen Institute), Bergen, Norway.
  3. Espen Villanger, 2004. "Powerful donors and foreign policy: The role of multilateral financial institutions," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2004: 12, CMI (Chr. Michelsen Institute), Bergen, Norway.
  4. Pincin, Jared, 2013. "Political power and aid tying practices in the development assistance committee countries," MPRA Paper 49806, University Library of Munich, Germany.
  5. Odd-Helge Fjeldstad, 2003. "What has trust got to do with it? Non-payment of service charges in local authorities in South Africa," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2003:12, CMI (Chr. Michelsen Institute), Bergen, Norway.
  6. Villanger, Espen, 2006. "Company interests and foreign aid policy: Playing donors off against one another," European Economic Review, Elsevier, Elsevier, vol. 50(3), pages 533-545, April.
  7. Basu, Kaushik, 2014. "Fiscal policy as an instrument of investment and growth," Policy Research Working Paper Series 6850, The World Bank.
  8. Kilby, Christopher, 2005. "World Bank lending and regulation," Economic Systems, Elsevier, Elsevier, vol. 29(4), pages 384-407, December.
  9. Mavrotas, George & Villanger, Espen, 2006. "Multilateral Aid Agencies and Strategic Donor Behaviour," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) DP2006/02, World Institute for Development Economic Research (UNU-WIDER).
  10. Ruxanda Berlinschi, 2010. "Reputation concerns in aid conditionality," The Review of International Organizations, Springer, Springer, vol. 5(4), pages 433-459, December.

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