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Strategic Interaction, Aid Effectiveness And The Formation Of Aid Policies In Donor Nations

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  • S. Mansoob Murshed

    (Utrecht School of Economics and the Institute of Social Studies, Utrecht University)

Abstract

This paper examines some of the issues associated with the aid donor process arising from the theory of agency or principal-agent models and endogenous policy determination. The principals may be viewed as legislators and the agents as the aid agency. In addition to adverse selection and moral hazard the paper considers intrinsic sources of motivation for agents and the trade-off between adverse selection and moral hazard. It also considers multiple task agents, and situations where there are many principals with divergent objectives. The principals might be better off by making the tasks more complementary and trading in their differing objectives. The paper also considers the determinants of sustaining compromise over aid policies when different political factions in donor nations have competing interests with regard to recipients or overall aid strategy.

Suggested Citation

  • S. Mansoob Murshed, 2003. "Strategic Interaction, Aid Effectiveness And The Formation Of Aid Policies In Donor Nations," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 28(1), pages 189-203, June.
  • Handle: RePEc:jed:journl:v:28:y:2003:i:1:p:189-203
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    References listed on IDEAS

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    1. Svensson, Jakob, 2000. "Foreign aid and rent-seeking," Journal of International Economics, Elsevier, vol. 51(2), pages 437-461, August.
    2. Murshed, S Mansoob & Sen, Somnath, 1995. "Aid Conditionality and Military Expenditure Reduction in Developing Countries: Models of Asymmetric Information," Economic Journal, Royal Economic Society, vol. 105(429), pages 498-509, March.
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    Cited by:

    1. Murshed, S. Mansoob, 2008. "On the Non-Contractual Nature of Donor-Recipient Interaction in Development Assistance," WIDER Working Paper Series 071, World Institute for Development Economic Research (UNU-WIDER).
    2. Murshed, S. Mansoob, 2004. "Strategic interaction and donor policy determination," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 311-323.

    More about this item

    Keywords

    Aid Effectiveness; Political Processes; Endogenous Policy Formation;

    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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