Decentralized Aid and Democracy
AbstractThe last three decades have seen an important surge of the non-governmental sector in the provision of foreign aid. Using NGOs to deliver aid can be a solution to bypass corrupt authorities, avoiding that aid resources are captured by local elites. However NGOs may also act as surrogates for governmental provision of public goods. This implies that citizens make their own governments less accountable. In democratic countries, this can reduce electoral support for provision of public services by the state and harm the poor that don't directly benefit from the NGOs' projects. We develop a theoretical model of vote over public finances to analytically characterise the effect of decentralised aid on welfare. We find that non-governmental aid can harm the poor, weaken governance and aggravate inequalities by crowding-out governmental expenditures. These inefficiencies occur even in a flawless institutional context. We also find that the crowding-out effect can be mitigated if NGOs target countries with low income inequalities or by focusing on humanitarian-oriented missions.
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Bibliographic InfoPaper provided by University of Namur, Department of Economics in its series Working Papers with number 1212.
Date of creation: 2012
Date of revision:
NGOs; Democracy; Foreign Aid; Decentralized Aid; Development; Public Economics; Political Economics;
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
- L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
- L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-22 (All new papers)
- NEP-POL-2012-12-22 (Positive Political Economics)
- NEP-PPM-2012-12-22 (Project, Program & Portfolio Management)
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