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Company interests and foreign aid policy: Playing donors out against each other

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Author Info
Espen Villanger

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Abstract

Despite the importance attached to conditionality by the donors, and the fact that aid is a crucial income source for the recipient, it is found that conditionality fails. One explanation for this failure could be that a halt in aid could trigger the recipient to cancel contracts with companies from donor countries, which creates incentives for the companies to put pressure towards aid disbursement. We use a multi-agent triadic model of the relationships between a recipient and two donors and two companies to illustrate that recipients may use contracts strategically to make companies influence the disbursement decision to avoid implementing the donors' conditions. Failing to take account of the companies' role yields the opposite result in this model, i.e., conditionality becomes successful.

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Publisher Info
Paper provided by CMI (Chr. Michelsen Institute), Bergen, Norway in its series CMI Working Papers with number WP 2003:5.

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Length: 40 pages
Date of creation: 2003
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Handle: RePEc:chm:wpaper:wp2003-5

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Related research
Keywords: Triadic Conditionality Foreign aid Foreign assistance;

Find related papers by JEL classification:
E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
F35 - International Economics - - International Finance - - - Foreign Aid

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Jan Isaksen, 2002. "Energy cooperation in Southern Africa: What role for Norway?," CMI Working Papers WP 2002:4, CMI (Chr. Michelsen Institute), Bergen, Norway. [Downloadable!]
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    Other versions:
  6. Odd-Helge Fjeldstad, 2002. "The fight against corruption and the role of parliamentarians," CMI Working Papers WP 2002:6, CMI (Chr. Michelsen Institute), Bergen, Norway. [Downloadable!]
  7. Pedersen, Karl R, 1996. " Aid, Investment and Incentives," Scandinavian Journal of Economics, Blackwell Publishing, vol. 98(3), pages 423-38.
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  11. Ivar Kolstad, 2003. "The evolution of social norms," CMI Working Papers WP 2003:1, CMI (Chr. Michelsen Institute), Bergen, Norway. [Downloadable!]
  12. Espen Villanger, 2003. "Company influence on foreign aid disbursement: Is conditionality credible when donors have mixed motives?," CMI Working Papers WP 2003:4, CMI (Chr. Michelsen Institute), Bergen, Norway. [Downloadable!]
    Other versions:
  13. 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. [Downloadable!] (restricted)
  14. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February. [Downloadable!] (restricted)
  15. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September. [Downloadable!] (restricted)
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  16. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April. [Downloadable!] (restricted)
  17. Collier, Paul & Guillaumont, Patrick & Guillaumont, Sylviane & Gunning, Jan Willem, 1997. "Redesigning conditionality," World Development, Elsevier, vol. 25(9), pages 1399-1407, September. [Downloadable!] (restricted)
  18. Ussif Rashid Sumaila & Joseph Apaloo, 2002. "A selected survey of traditional and evolutionary game theory," CMI Working Papers WP 2002:7, CMI (Chr. Michelsen Institute), Bergen, Norway. [Downloadable!]
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  21. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank. [Downloadable!]
    Other versions:
  22. Odd-Helge Fjeldstad, 2002. "Fighting fiscal corruption: The case of the Tanzania Revenue Authority," CMI Working Papers WP 2002:3, CMI (Chr. Michelsen Institute), Bergen, Norway. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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 WP 2003:12, CMI (Chr. Michelsen Institute), Bergen, Norway. [Downloadable!]
  2. Odd-Helge Fjeldstad & Florida Henjewele & Geoffrey Mwambe & Erasto Ngalewa & Knut Nygaard, 2004. "Local government finances and financial management in Tanzania," CMI Working Papers WP 2004: 7, CMI (Chr. Michelsen Institute), Bergen, Norway. [Downloadable!]
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