Collusion Among Interest Grops: Foreign Aid and Rent Dissipation
AbstractThis paper develops a game-theoretic model of public policy in a developing country in order to explain a number of empirical regularities. It is shown that under certain circumstances, an increase in government revenue will be completely crowded out by increased rent dissipation, leaving the provision of public goods unaltered. In this model, there are two possible ways in which foreign aid may affect the outcome. First, as foreign aid to a large extent can be seen as general budget support, the paper provides an explanation for why increased disbursements do not necessarily lead to higher provision of public goods. Second, the mere fact that the donor is expected to allocate aid according to the recipients' future needs may increase rent dissipation and reduce the number of periods in which efficient policies can be sustained.
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Bibliographic InfoPaper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 610.
Length: 32 pages
Date of creation: 03 Nov 1997
Date of revision:
Publication status: Published in Journal of International Economics, 2000, pages 437-461.
Contact details of provider:
Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Web page: http://www.iies.su.se/
More information through EDIRC
game-theoretic model; public policy; developing country; government revenue; crowding out; foreign aid;
Other versions of this item:
- Svensson, J, 1996. "Collusion Among Interest Groups : Foreign Aid and Rent-Dissipation," Papers 610, Stockholm - International Economic Studies.
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
- O20 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - General
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