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Shortcuts and Signals: An Analysis of the Micro‐level Determinants of Aid Allocation, with Case Study Evidence from Brazil

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  • Gina Yannitell Reinhardt

Abstract

Does the distribution of foreign development assistance depend on the organizational capacity of the recipient organization? I argue that employees at donor agencies seek signals of which recipients will implement aid most effectively, and use these signals to determine the destination of foreign aid on the micro level. Qualitative evidence gathered in the US and Brazil indicates the types of signals donors seek and recipients strive to transmit: signals of a recipient's professionalism, reputation, and sustainability. After developing a signaling game to derive the conditions under which these signals might be credible indicators of implementation effectiveness, I present quantitative evidence of aid recipient organizations in Brazil and score them on the three signals. Statistical tests confirm that organizations with higher levels of these signals are more likely to receive funding, suggesting that donors use these signals to determine the destination of development assistance.

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  • Gina Yannitell Reinhardt, 2006. "Shortcuts and Signals: An Analysis of the Micro‐level Determinants of Aid Allocation, with Case Study Evidence from Brazil," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 297-312, May.
    • Handle: RePEc:bla:rdevec:v:10:y:2006:i:2:p:297-312
    DOI: 10.1111/j.1467-9361.2006.00319.x
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    1. Rodrik, Dani, 1995. "Why is there Multilateral Lending?," CEPR Discussion Papers 1207, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Mansoob Murshed, 2008. "On the Non-Contractual Nature of Donor-Recipient Interaction in Development Assistance," WIDER Working Paper Series RP2008-71, World Institute for Development Economic Research (UNU-WIDER).
    2. Samuel Brazys & Krishna Chaitanya Vadlamannati & Tianyang Song, 2019. "Which Wheel Gets the Grease? Constituent Agency and Sub-national World Bank Aid Allocation," Working Papers 201907, Geary Institute, University College Dublin.
    3. Riemer P. Faber & Pierre Koning, 2017. "Why not fully spend a conditional block grant?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(1), pages 60-95, February.
    4. Emmanuel Frot & Javier Santiso, 2011. "Herding in Aid Allocation," Kyklos, Wiley Blackwell, vol. 64(1), pages 54-74, February.
    5. Riemer P. Faber & Pierre Koning, 2017. "Why not fully spend a conditional block grant?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(1), pages 60-95, February.
    6. Pallas, Sarah Wood & Ruger, Jennifer Prah, 2017. "Effects of donor proliferation in development aid for health on health program performance: A conceptual framework," Social Science & Medicine, Elsevier, vol. 175(C), pages 177-186.
    7. repec:bla:rdevec:v:13:y:2009:i:s1:p:416-428 is not listed on IDEAS

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