Aid Tying and Donor Fragmentation
This study analyzes theoretically and empirically the impact of aid fragmentation on donors’ decisions to tie their development aid to purchases from contractors based in their own countries. Building on collective action theory, it argues that a donor with a larger share of the aid market in a country has stronger incentives to maximize the development impact of its aid, by tying less of it. Empirical tests strongly and consistently support the prediction that higher donor aid shares will be associated with less aid tying. This finding is robust to recipient controls, donor fixed effects, and instrumental variables estimation. Furthermore, it contradicts other studies suggesting that when a small number of donors dominate the aid market in a country, they may exploit their monopoly power by tying more of their aid.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Oecd, 2009. "2009 OECD Report on Division of Labour," OECD Journal on Development, OECD Publishing, vol. 10(4), pages 7-58.
- Easterly, William & Williamson, Claudia R., 2011.
"Rhetoric versus Reality: The Best and Worst of Aid Agency Practices,"
Elsevier, vol. 39(11), pages 1930-1949.
- Easterly, William & Williamson, Claudia R., 2011. "Rhetoric versus reality: the best and worst of aid agency practices," MPRA Paper 39139, University Library of Munich, Germany.
- Alesina, Alberto & Dollar, David, 2000.
"Who Gives Foreign Aid to Whom and Why?,"
Journal of Economic Growth,
Springer, vol. 5(1), pages 33-63, March.
- Alberto Alesina & David Dollar, 1998. "Who Gives Foreign Aid to Whom and Why?," NBER Working Papers 6612, National Bureau of Economic Research, Inc.
- Dollar, David & Alesina, Alberto, 2000. "Who Gives Foreign Aid to Whom and Why?," Scholarly Articles 4553020, Harvard University Department of Economics.
- Amegashie, J. Atsu & Ouattara, Bazoumanna & Strobl, Eric, 2007.
"Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid,"
3158, University Library of Munich, Germany, revised 06 May 2007.
- Ouattara, Bazoumana & Amegashie, J. Atsu & Strobl, Eric, 2009. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," Proceedings of the German Development Economics Conference, Frankfurt a.M. 2009 24, Verein für Socialpolitik, Research Committee Development Economics.
- J. Atsu Amegashie & Bazoumana Ouattara & Eric Strobl, 2007. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," CESifo Working Paper Series 1996, CESifo Group Munich.
- J. Atsu Amegashie & Bazoumana Ouattara & Eric Strobl, 2007. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," Working Papers 0702, University of Guelph, Department of Economics and Finance.
- Gibson, Clark C. & Andersson, Krister & Ostrom, The late Elinor & Shivakumar, Sujai, 2005. "The Samaritan's Dilemma: The Political Economy of Development Aid," OUP Catalogue, Oxford University Press, number 9780199278855, December.
- Anderson, Edward, 2012. "Aid fragmentation and donor transaction costs," Economics Letters, Elsevier, vol. 117(3), pages 799-802.
- KIMURA Hidemi & SAWADA Yasuyuki & MORI Yuko, 2007.
"Aid Proliferation and Economic Growth: A Cross-Country Analysis,"
07044, Research Institute of Economy, Trade and Industry (RIETI).
- Kimura, Hidemi & Mori, Yuko & Sawada, Yasuyuki, 2012. "Aid Proliferation and Economic Growth: A Cross-Country Analysis," World Development, Elsevier, vol. 40(1), pages 1-10.
- Knack, Stephen & Rogers, F. Halsey & Eubank, Nicholas, 2011.
"Aid Quality and Donor Rankings,"
Elsevier, vol. 39(11), pages 1907-1917.
- Martens,Bertin & Mummert,Uwe & Murrell,Peter & Seabright,Paul, 2002.
"The Institutional Economics of Foreign Aid,"
Cambridge University Press, number 9780521808187, November.
- Peter Kragelund, 2008. "The Return of Non-DAC Donors to Africa: New Prospects for African Development?," Development Policy Review, Overseas Development Institute, vol. 26(5), pages 555-584, 09.
- Djankov, Simeon & Montalvo, Jose G. & Reynal-Querol, Marta, 2009. "Aid with multiple personalities," Journal of Comparative Economics, Elsevier, vol. 37(2), pages 217-229, June.
- William Easterly, 2002. "The cartel of good intentions: The problem of bureaucracy in foreign aid," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 5(4), pages 223-250.
- Frot, Emmanuel & Santiso, Javier, 2009.
"Crushed Aid: Fragmentation in Sectoral Aid,"
SITE Working Paper Series
6, Stockholm Institute of Transition Economics, Stockholm School of Economics.
- Knack,Stephen & Rahman, Aminur, 2004.
"Donor fragmentation and bureaucratic quality in aid recipients,"
Policy Research Working Paper Series
3186, The World Bank.
- Knack, Stephen & Rahman, Aminur, 2007. "Donor fragmentation and bureaucratic quality in aid recipients," Journal of Development Economics, Elsevier, vol. 83(1), pages 176-197, May.
- Emmanuel Frot & Javier Santiso, 2008. "Development Aid and Portfolio Funds: Trends, Volatility and Fragmentation," OECD Development Centre Working Papers 275, OECD Publishing.
- Arnab Acharya & Ana Teresa Fuzzo de Lima & Mick Moore, 2006. "Proliferation and fragmentation: Transactions costs and the value of aid," Journal of Development Studies, Taylor & Francis Journals, vol. 42(1), pages 1-21.
- Andrew Rogerson, 2005. "Aid Harmonisation and Alignment: Bridging the Gaps between Reality and the Paris Reform Agenda," Development Policy Review, Overseas Development Institute, vol. 23(5), pages 531-552, 09.
When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:44:y:2013:i:c:p:63-76. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If references are entirely missing, you can add them using this form.