Beyond Planning: Markets and Networks for Better Aid
AbstractThe political economy of aid agencies is driven by incomplete information and multiple competing objectives and confounded by principal-agent and collective-action problems. Policies to improve aid rely too much on a planning paradigm that tries to ignore, rather than change, the political economy of aid. A considered combination of market mechanisms, networked collaboration, and collective regulation would be more likely to lead to significant improvements. A “collaborative market” for aid might include unbundling funding from aid management to create more explicit markets; better information gathered from the intended beneficiaries of aid; decentralized decision-making; a sharp increase in transparency and accountability of donor agencies; the publication of more information about results; pricing externalities; and new regulatory arrangements to make markets work. The aid system is in a political equilibrium, determined by deep characteristics of the aid relationship and the political economy of aid institutions. Reformers should seek to change that equilibrium rather than try to move away from it. The priority should be on reforms that put pressure on the aid system to evolve in the right direction rather than on grand designs.
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Bibliographic InfoPaper provided by Center for Global Development in its series Working Papers with number 185.
Length: 45 pages
Date of creation: Oct 2009
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Web page: http://www.cgdev.org
aid; aid reform; aid agencies; political economy; market mechanism; networks;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-24 (All new papers)
- NEP-PPM-2009-10-24 (Project, Program & Portfolio Management)
- NEP-REG-2009-10-24 (Regulation)
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