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Foreign Aid in the Presence of Corruption: Differential Games among Donors

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  • Murray C. Kemp
  • Ngo Van Long

Abstract

We consider two dynamic games of foreign aid. Model 1 deals with the case where donor countries continually feel the warm glow from the act of giving. Model 2 postulates that donors will stop giving aid when a target level of development is reached. In Model 1 , there are multiple equilibria that can be Pareto ranked. In Model 2 , the equilibrium strategies are nonlinear functions of the level of development. The flow of aid falls at a faster and faster rate as the target is approached. An increase in corruption will increase the flow of aid. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd.

Suggested Citation

  • Murray C. Kemp & Ngo Van Long, 2009. "Foreign Aid in the Presence of Corruption: Differential Games among Donors," Review of International Economics, Wiley Blackwell, vol. 17(SI), pages 230-243, May.
  • Handle: RePEc:bla:reviec:v:17:y:2009:i:si:p:230-243
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    1. Van Long, Ngo, 2016. "The Impacts of Other-Regarding Preferences and Ethical Choice on Environmental Outcomes: A Review of the Literature," Strategic Behavior and the Environment, now publishers, pages 1-35.

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