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Acting Autonomously or Mimicking the State and Peers? A Panel Tobit Analysis of Financial Dependence and Aid Allocation by Swiss NGOs

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Author Info
Axel Dreher
Peter Nunnenkamp
Hannes Öhler
Johannes Weisser

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Abstract

NGO aid is still widely believed to be superior to official aid (ODA). However, the incentives of NGOs to excel and target aid to the poor and deserving are increasingly disputed. We contribute to the emerging literature on the allocation of NGO aid by performing panel Tobit estimations for Swiss NGOs. The analysis offers new insights in two major regards: First, we cover the allocation of both self-financed and officially co-financed aid for a large panel of NGOs and recipient countries. Second, by classifying each NGO according to its financing structure, we address the unresolved question of whether financial dependence on the government impairs the targeting of NGO aid. It turns out that NGOs mimic the state as well as NGO peers. Officially refinanced NGOs are more inclined to imitate the allocation of ODA. However, the degree of financial dependence does not affect the poverty orientation of NGO aid and the incentives of NGOs to engage in easier environments. The allocation of self-financed aid differs in several respects from the allocation of officially co-financed aid, including the role of financial dependence for imitating the state and herding among NGOs.

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Paper provided by Courant Research Centre PEG in its series Courant Research Centre: Poverty, Equity and Growth - Discussion Papers with number 1.

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Date of creation: 01 Feb 2009
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Handle: RePEc:got:gotcrc:001

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Related research
Keywords: NGO aid; aid allocation; official co-financing; financial dependence;

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Find related papers by JEL classification:
F35 - International Economics - - International Finance - - - Foreign Aid

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  6. Neumayer, Eric, 2002. "Is Good Governance Rewarded? A Cross-national Analysis of Debt Forgiveness," World Development, Elsevier, vol. 30(6), pages 913-930, June. [Downloadable!] (restricted)
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  8. Boriana Yontcheva & Gilles Nancy, 2006. "Does NGO Aid Go to the Poor? Empirical Evidence from Europe," IMF Working Papers 06/39, International Monetary Fund. [Downloadable!]
  9. Ilyana Kuziemko & Eric Werker, 2006. "How Much Is a Seat on the Security Council Worth? Foreign Aid and Bribery at the United Nations," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 905-930, October. [Downloadable!] (restricted)
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  14. Anna Fruttero & Varun Gauri, 2005. "The Strategic Choices of NGOs: Location Decisions in Rural Bangladesh1," The Journal of Development Studies, Taylor and Francis Journals, vol. 41(5), pages 759-787, July. [Downloadable!] (restricted)
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