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Company Influence on Foreign Aid Disbursement: Is Conditionality Credible when Donors Have Mixed Motives?

Author

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  • Espen Villanger

    () (Chr. Michelsen Institute)

Abstract

When donors enforce conditionality upon recipients who do not implement the conditions, companies can suffer from cancellation of their contracts with the recipient when aid dries up. A strategic recipient may avoid implementing controversial conditions by only granting a contract to a company that puts pressure on the donor to keep aid flowing. In our model, each of these three agents takes account of each of the two other agents' actions. We show that this triadic structure can be crucial when explaining recipients' use of companies to influence donors to give aid unconditionally, and we offer a time-consistent explanation for the failure of conditionality.

Suggested Citation

  • Espen Villanger, 2004. "Company Influence on Foreign Aid Disbursement: Is Conditionality Credible when Donors Have Mixed Motives?," Southern Economic Journal, Southern Economic Association, vol. 71(2), pages 334-351, October.
  • Handle: RePEc:sej:ancoec:v:71:2:y:2004:p:334-351
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Villanger, Espen, 2006. "Company interests and foreign aid policy: Playing donors off against one another," European Economic Review, Elsevier, vol. 50(3), pages 533-545, April.
    2. Odd-Helge Fjeldstad & Florida Henjewele & Geoffrey Mwambe & Erasto Ngalewa & Knut Nygaard, 2004. "Local government finances and financial management in Tanzania," CMI Working Papers WP 2004: 7, CMI (Chr. Michelsen Institute), Bergen, Norway.
    3. Lamothe, Herrissa D., 2010. "Re-conceptualizing the international aid structure: recipient donor interactions and the rudiments of a feedback mechanism," Financiamiento para el Desarrollo 234, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    4. Ruxanda Berlinschi, 2010. "Reputation concerns in aid conditionality," The Review of International Organizations, Springer, vol. 5(4), pages 433-459, December.
    5. Pincin, Jared, 2013. "Political power and aid tying practices in the development assistance committee countries," MPRA Paper 49806, University Library of Munich, Germany.
    6. Odd-Helge Fjeldstad, 2003. "What has trust got to do with it? Non-payment of service charges in local authorities in South Africa," CMI Working Papers WP 2003:12, CMI (Chr. Michelsen Institute), Bergen, Norway.
    7. Kilby, Christopher, 2005. "World Bank lending and regulation," Economic Systems, Elsevier, vol. 29(4), pages 384-407, December.
    8. Pincin, Jared, 2012. "Political power and aid tying practices in the development assistance committee countries," MPRA Paper 39463, University Library of Munich, Germany.
    9. Espen Villanger, 2003. "Company interests and foreign aid policy: Playing donors out against each other," CMI Working Papers WP 2003:5, CMI (Chr. Michelsen Institute), Bergen, Norway.
    10. Espen Villanger, 2004. "Powerful donors and foreign policy: The role of multilateral financial institutions," CMI Working Papers WP 2004: 12, CMI (Chr. Michelsen Institute), Bergen, Norway.
    11. Basu, Kaushik, 2014. "Fiscal policy as an instrument of investment and growth," Policy Research Working Paper Series 6850, The World Bank.
    12. Mavrotas, George & Villanger, Espen, 2006. "Multilateral Aid Agencies and Strategic Donor Behaviour," WIDER Working Paper Series DP2006/02, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F35 - International Economics - - International Finance - - - Foreign Aid

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