Special Interest Politics and Aid Fungibility
AbstractWe develop a political-economic model of aid fungibility. A donor country gives aid to a recipient government for the benefit of a target group. However, the recipient government accepts political contributions from a lobby group not targeted by the donor and transfers a fraction of the aid to the non-target group. The size of this fraction is determined endogenously in the political equilibrium in the recipient country. We examine how the donor's behaviour affects the equilibrium, and how changes in the parameters of the model affect the total amount of aid and the proportion of it reaching the target group.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2482.
Date of creation: Jun 2000
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Find related papers by JEL classification:
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F35 - International Economics - - International Finance - - - Foreign Aid
- O0 - Economic Development, Technological Change, and Growth - - General
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