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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
- Tim Besley & Stephen Coate, .
"An Economic Model of Representative Democracy,"
Penn CARESS Working Papers, Penn Economics Department
ecf70d639d700dba5327ab0c8, Penn Economics Department.
- Tim Besley & Stephen Coate, . ""An Economic Model of Representative Democracy''," CARESS Working Papres, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences 95-02, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Svensson, Jakob, 2000.
"Foreign aid and rent-seeking,"
Journal of International Economics, Elsevier,
Elsevier, vol. 51(2), pages 437-461, August.
- Koch, Dirk-Jan, 2007. "Blind Spots on the Map of Aid Allocations: Concentration and Complementarity of International NGO Aid," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Mark McGillivray & Simon Feeny & Niels Hermes & Robert Lensink, 2006. "Controversies over the impact of development aid: it works; it doesn't; it can, but that depends …," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(7), pages 1031-1050.
- Tseday Jemaneh Mekasha & Finn Tarp, 2013.
"Aid and Growth: What Meta-Analysis Reveals,"
Journal of Development Studies, Taylor & Francis Journals,
Taylor & Francis Journals, vol. 49(4), pages 564-583, April.
- Tseday Jemaneh Mekasha & Finn Tarp, 2011. "Aid and Growth What Meta-Analysis Reveals," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).
- David Dollar & Craig Burnside, 2000.
"Aid, Policies, and Growth,"
American Economic Review, American Economic Association,
American Economic Association, vol. 90(4), pages 847-868, September.
- Torsten Persson & Guido Tabellini, 2002. "Political Economics: Explaining Economic Policy," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262661314, December.
- Anna Fruttero & Varun Gauri, 2005. "The Strategic Choices of NGOs: Location Decisions in Rural Bangladesh," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 41(5), pages 759-787.
- Channing, Arndt & Jones, Sam & Tarp, Finn, 2010.
"Aid, Growth, and Development Have We Come Full Circle?,"
Working Paper Series, World Institute for Development Economic Research (UNU-WIDER)
wp2010-96, World Institute for Development Economic Research (UNU-WIDER).
- Arndt Channing & Jones Sam & Tarp Finn, 2010. "Aid, Growth, and Development: Have We Come Full Circle?," Journal of Globalization and Development, De Gruyter, De Gruyter, vol. 1(2), pages 1-29, December.
- Alberto Alesina & Roberto Perotti, 1993.
"Income Distribution, Political Instability, and Investment,"
NBER Working Papers
4486, National Bureau of Economic Research, Inc.
- Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, Elsevier, vol. 40(6), pages 1203-1228, June.
- Simeon Djankov & José Garcia Montalvo & Marta Reynal-Querol, 2005.
"The curse of aid,"
Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra
870, Department of Economics and Business, Universitat Pompeu Fabra.
- William Easterly, 2002. "The cartel of good intentions: The problem of bureaucracy in foreign aid," Journal of Economic Policy Reform, Taylor & Francis Journals, Taylor & Francis Journals, vol. 5(4), pages 223-250.
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195102680, October.
- Ghazala Mansuri & Vijayendra Rao, 2013. "Localizing Development : Does Participation Work?," World Bank Publications, The World Bank, number 11859, August.
- Herzer, Dierk & Nunnenkamp, Peter, 2012.
"The effect of foreign aid on income inequality: Evidence from panel cointegration,"
Structural Change and Economic Dynamics, Elsevier,
Elsevier, vol. 23(3), pages 245-255.
- Dierk Herzer, Peter Nunnenkamp, 2012. "The Effect of Foreign Aid on Income Inequality: Evidence from Panel Cointegration," Kiel Working Papers 1762, Kiel Institute for the World Economy.
- Hristos Doucouliagos & Martin Paldam, 2005.
"The Aid Effectiveness Literature. The Sad Result of 40 Years of Research,"
Economics Working Papers, School of Economics and Management, University of Aarhus
2005-15, School of Economics and Management, University of Aarhus.
- Hristos Doucouliagos & Martin Paldam, 2009. "The Aid Effectiveness Literature: The Sad Results Of 40 Years Of Research," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 23(3), pages 433-461, 07.
- Doucouliagos , H. & Paldam, M., 2007. "The aid effectiveness literature: The sad results of 40 years of research," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0773, Faculty of Economics, University of Cambridge.
- Christy Cannon Lorgen, 1998. "Dancing with the state: the role of NGOs in health care and health policy," Journal of International Development, John Wiley & Sons, Ltd., vol. 10(3), pages 323-339.
- Alberto Chong & Mark Gradstein & Cecilia Calderon, 2009. "Can foreign aid reduce income inequality and poverty?," Public Choice, Springer, Springer, vol. 140(1), pages 59-84, July.
- Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, Elsevier, vol. 32(2-3), pages 542-550, March.
- Sandmo, Agnar, 1980. "Anomaly and Stability in the Theory of Externalities," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 94(4), pages 799-807, June.
- Paul Mosley & John Hudson & Arjan Verschoor, 2004. "Aid, Poverty Reduction and the 'New Conditionality'," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(496), pages F217-F243, 06.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-H�l�ne Mathieu).
If references are entirely missing, you can add them using this form.