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Why Do Aid Agencies Exist?


  • Bertin Martens


This article seeks to explain the organisational set-up of foreign aid delivery from a Coasian perspective: Why are there many and different aid organisations and not just one? Why is foreign aid not transferred directly from donor to beneficiary? With zero transaction costs and fully shared preferences between donors and beneficiaries, there would be no need for aid agencies. Their role is not so much to transfer funds or goods and services to developing countries, but (a) to reduce ex-ante transaction costs and (b) to mediate between the diverging preferences of donors and recipients, and package aid flows in a contract that reduces ex-post uncertainties for donors. Outcomes differ according to types of agencies and aid delivery instruments. Copyright Overseas Development Institute 2005.

Suggested Citation

  • Bertin Martens, 2005. "Why Do Aid Agencies Exist?," Development Policy Review, Overseas Development Institute, vol. 23(6), pages 643-663, November.
  • Handle: RePEc:bla:devpol:v:23:y:2005:i:6:p:643-663

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    2. Kate Neely & Jeffrey P. Walters, 2016. "Using Causal Loop Diagramming to Explore the Drivers of the Sustained Functionality of Rural Water Services in Timor-Leste," Sustainability, MDPI, Open Access Journal, vol. 8(1), pages 1-18, January.
    3. François Pacquement, 2011. "Building global policies: development assistance, a source of inspiration?," Post-Print hal-01984698, HAL.
    4. Hagen, Rune Jansen, 2014. "Rents and the Political Economy of Development Aid," Working Papers in Economics 07/14, University of Bergen, Department of Economics.
    5. Amihai Glazer & Rune Jansen Hagen & Jørn Rattsø, 2018. "Help not needed? Optimal host country regulation of expatriate NGO workers," Review of International Economics, Wiley Blackwell, vol. 26(2), pages 302-321, May.
    6. Yanguas, Pablo & Hulme, David, 2015. "Barriers to Political Analysis in Aid Bureaucracies: From Principle to Practice in DFID and the World Bank," World Development, Elsevier, vol. 74(C), pages 209-219.
    7. repec:eee:wdevel:v:96:y:2017:i:c:p:375-389 is not listed on IDEAS
    8. Marc Raffinot, 2006. "Prêts ou dons. Commentaires," Revue d’économie du développement, De Boeck Université, vol. 14(2), pages 159-165.
    9. Gulrajani, Nilima, 2010. "Challenging global accountability: the intersection of contracts and culture in the World Bank," LSE Research Online Documents on Economics 30045, London School of Economics and Political Science, LSE Library.
    10. Ignacio Martínez, 2007. "La Cooperación de las ONGD Españolas en Perú: Hacia una Acción más Estratégica," Policy Papers del Instituto Complutense de Estudios Internacionales 07-01, Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales.
    11. Nunberg, Barbara & Taliercio, Robert R., 2012. "Sabotaging Civil Service Reform in Aid-Dependent Countries: Are Donors to Blame?," World Development, Elsevier, vol. 40(10), pages 1970-1981.
    12. Jisun Yi, 2015. "Lessons for Japanese foreign aid from research on aid's impact," WIDER Working Paper Series 055, World Institute for Development Economic Research (UNU-WIDER).
    13. Hicks, Robert L. & Parks, Bradley C. & Tierney, Michael J., 2005. "Explaining the Allocation of Bilateral and Multilateral Environmental Aid to Developing Countries," 2005 Annual meeting, July 24-27, Providence, RI 19346, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. Canh Thien Dang & Trudy Owens, 2017. "What motivates Ugandan NGOs to diversify: Risk reduction or private gain?," Discussion Papers 2017-11, University of Nottingham, CREDIT.
    15. repec:elg:eechap:15325_15 is not listed on IDEAS
    16. van Dalen, Hendrik P., 2008. "Designing Global Collective Action in Population and HIV/AIDS Programs, 1983-2002: Has Anything Changed?," World Development, Elsevier, vol. 36(3), pages 362-382, March.

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