The Samaritan's Dilemma and the Effectiveness of Development Aid
Contributing to the alleviation of poverty in recipient countries is one of the main goals of most aid organizations. In this paper the following question is asked: could it be the case that altruistic aid organizations are counter-productive in the sense that their activities may cause the extent of poverty to increase or the relative income distribution to worsen? The answer is yes and the reason is simply that recipient governments adjust in order to qualify for aid. It is shown that if recipient governments perceive themselves as being engaged in a competition for aid and/or if the aggregate aid budget is endogenous, then the incentive problems may become particularly severe. Copyright Kluwer Academic Publishers 2001
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- Maizels, Alfred & Nissanke, Machiko K., 1984. "Motivations for aid to developing countries," World Development, Elsevier, vol. 12(9), pages 879-900, September.
- Trumbull, William N & Wall, Howard J, 1994. "Estimating Aid-Allocation Criteria with Panel Data," Economic Journal, Royal Economic Society, vol. 104(425), pages 876-82, July.
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- Pedersen, Karl R, 1996. " Aid, Investment and Incentives," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(3), pages 423-38.
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