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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. Deger, Saadet & Sen, Somnath, 1995. "Military expenditure and developing countries," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 11, pages 275-307, Elsevier.
    3. Maskin, Eric & Tirole, Jean, 1990. "The Principal-Agent Relationship with an Informed Principal: The Case of Private Values," Econometrica, Econometric Society, vol. 58(2), pages 379-409, March.
    4. 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. 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. repec:pra:mprapa:55868 is not listed on IDEAS
    3. Murshed, S. Mansoob, 2004. "Strategic interaction and donor policy determination," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 311-323.
    4. S. Mansoob Murshed, 2009. "On the Non-Contractual Nature of Donor-Recipient Interaction in Development Assistance," Review of Development Economics, Wiley Blackwell, vol. 13(s1), pages 416-428, August.
    5. Fletcher Tembo, 2004. "NGDOs' role in building poor people's capacity to benefit from globalization," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(7), pages 1023-1037.

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    More about this item

    Keywords

    Aid Effectiveness; Political Processes; Endogenous Policy Formation;
    All these keywords.

    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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