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Funding, Competition and the Efficiency of NGOs: An Empirical Analysis of Non-charitable Expenditure of US NGOs Engaged in Foreign Aid

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  • Peter Nunnenkamp
  • Hannes Öhler

Abstract

We assess the determinants of the wide variation in the efficiency of foreign aid activities across US-based non-governmental organizations (NGOs). In particular, we analyze whether non-charitable expenditures – i.e., administration, management and fundraising – depend on the intensity of competition among NGOs and on the degree to which they are refinanced by governments. We control for NGO heterogeneity in various dimensions as well as major characteristics of recipient countries. We find that fiercer competition is associated with more efficient foreign aid activities of NGOs, rather than leading to “excessive” fundraising. Official funding tends to increase administrative costs. Nevertheless, officially financed NGOs spend relatively more on charitable activities since they are less concerned with collecting private donations through fundraising efforts

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1640.

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Length: 25 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:kie:kieliw:1640

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Keywords: non-governmental organizations; foreign aid; administrative costs; fundraising; United States;

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References

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  1. James Andreoni & A. Abigail Payne, 2003. "Do Government Grants to Private Charities Crowd Out Giving or Fund-raising?," American Economic Review, American Economic Association, American Economic Association, vol. 93(3), pages 792-812, June.
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  3. Edwards, Michael & Hulme, David, 1996. "Too close for comfort? the impact of official aid on nongovernmental organizations," World Development, Elsevier, Elsevier, vol. 24(6), pages 961-973, June.
  4. Rachel M. McCleary & Robert J. Barro, 2006. "U.S.-Based Private Voluntary Organizations: Religious and Secular PVOs Engaged in International Relief & Development," NBER Working Papers 12238, National Bureau of Economic Research, Inc.
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  6. Payne, A. Abigail, 1998. "Does the government crowd-out private donations? New evidence from a sample of non-profit firms," Journal of Public Economics, Elsevier, Elsevier, vol. 69(3), pages 323-345, September.
  7. Edward L. Glaeser & Andrei Shleifer, 1998. "Not-For-Profit Entrepreneurs," NBER Working Papers 6810, National Bureau of Economic Research, Inc.
  8. Axel Dreher & Peter Nunnenkamp & Susann Thiel & Rainer Thiele, 2010. "Aid Allocation by German NGOs: Does the Degree of Public Refinancing Matter?," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 23, Courant Research Centre PEG.
  9. Riber, D.C. & Wilhelm, M.O., 1996. "Altruistic and Joy-of-Giving Motivations in Charitable Behavior," Papers, Pennsylvania State - Department of Economics 1-96-4, Pennsylvania State - Department of Economics.
  10. Eric Werker & Faisal Z. Ahmed, 2008. "What Do Nongovernmental Organizations Do?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 22(2), pages 73-92, Spring.
  11. Rose-Ackerman, Susan, 1982. "Charitable Giving and "Excessive" Fundraising," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(2), pages 193-212, May.
  12. Aldashev, Gani & Verdier, Thierry, 2010. "Goodwill bazaar: NGO competition and giving to development," Journal of Development Economics, Elsevier, Elsevier, vol. 91(1), pages 48-63, January.
  13. Khanna, Jyoti & Sandler, Todd, 2000. "Partners in giving:: The crowding-in effects of UK government grants," European Economic Review, Elsevier, Elsevier, vol. 44(8), pages 1543-1556, August.
  14. Edward L. Glaeser, 2002. "The Governance of Not-For-Profit Firms," NBER Working Papers 8921, National Bureau of Economic Research, Inc.
  15. Jeremy Thornton, 2008. "Competition, Contractibility, and the Market for Donors to Nonprofits," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 24(1), pages 215-246, May.
  16. Suzanne McCoskey, 2005. "NGOs in the Aid Community: Do Funding Source or Economic Conditioning Matter to Decisions of Country Involvement?," Development and Comp Systems 0508004, EconWPA.
  17. Aldashev, Gani & Verdier, Thierry, 2007. "Internationalization of NGOs and Competition on Markets for Development Donations," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6511, C.E.P.R. Discussion Papers.
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Cited by:
  1. Peter Nunnenkamp & Hannes Öhler & Tillmann Schwörer, 2011. "US based NGOs in International Development Cooperation: Survival of the Fittest?," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 83, Courant Research Centre PEG.
  2. Ly, Pierre & Mason, Geri, 2012. "Competition Between Microfinance NGOs: Evidence from Kiva," World Development, Elsevier, Elsevier, vol. 40(3), pages 643-655.

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