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Clientelism and aid

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  • Casamatta, Georges
  • Vellutini, Charles

Abstract

Using a model of probabilistic voting, we analyse the impact of aid on the political equilibrium in the recipient country or region. We consider two kinds of politicians: the benevolent one is interested in promoting social welfare whereas the other one is clientelistic, his only goal being to maximize his chances of being elected. We find that the impact of aid on the political equilibrium and therefore on the quality of the policy (using the utilitarian social welfare as a benchmark) in the recipient country ultimately depends on the value of the elasticity of marginal consumption, which governs how the sensitivity of voters to a clientelistic allocation of resources (over a socially optimal one) varies with the level of consumption. When the elasticity is low, the probability that the clientelistic politician be elected increases and the expected policy outcome gets further away from the socially desirable policy set. This case of substitution of policy quality by aid can help to explain the poor performance of conditionality in improving policy. Perhaps more surprising is the opposite case, which arises for high values of the elasticity of marginal utility: an increase in aid worsens the clientelistic candidate?s election prospects and thus improves the expected policy set.
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  • Casamatta, Georges & Vellutini, Charles, 2008. "Clientelism and aid," Journal of Development Economics, Elsevier, vol. 87(2), pages 322-332, October.
    • Handle: RePEc:eee:deveco:v:87:y:2008:i:2:p:322-332
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    Cited by:

    1. Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4415-4523, Elsevier.
    2. Marcus Drometer, 2019. "Institutional quality and foreign aid," ifo Working Paper Series 287, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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