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A Model of Nongovernmental Organization Regulation with an Application to Uganda

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  • Ronelle Burger
  • Indraneel Dasgupta
  • Trudy Owens

Abstract

We develop a model of regulation of service-delivery nongovernmental organizations (NGOs), where future grants are conditional on prior spending of some minimal proportion of current revenue on direct project-related expenses. Such regulation induces some NGOs to increase current project spending but imposes wasteful costs of compliance verification on all NGOs. Under a large class of parametric configurations, we find that regulation increases total discounted project expenditure over a regime of no regulation, when verification costs constitute no more than 15% of initial revenue. We characterize the optimal regulatory policy under these configurations. We apply our analysis to a large sample of NGOs from Uganda and find regulation to be beneficial in that context.

Suggested Citation

  • Ronelle Burger & Indraneel Dasgupta & Trudy Owens, 2015. "A Model of Nongovernmental Organization Regulation with an Application to Uganda," Economic Development and Cultural Change, University of Chicago Press, vol. 64(1), pages 71-111.
    • Handle: RePEc:ucp:ecdecc:doi:10.1086/682885
    DOI: 10.1086/682885
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    References listed on IDEAS

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    1. Ronelle BURGER & Indraneel DASGUPTA & Trudy OWENS, 2015. "Why Pay NGOs to Involve the Community?," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(1), pages 7-31, March.
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    8. Ritva Reinikka & Jakob Svensson, 2010. "Working for God? Evidence from a Change in Financing of Nonprofit Health Care Providers in Uganda," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1159-1178, December.
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    Cited by:

    1. Gani Aldashev & Marco Marini & Thierry Verdier, 2017. "Samaritan Bundles: Inefficient Clustering in NGO Projects," Working Papers 6/17, Sapienza University of Rome, DISS.
    2. Gani Aldashev & Marco Marini & Thierry Verdier, 2020. "Samaritan Bundles: Fundraising Competition and Inefficient Clustering in NGO Projects," The Economic Journal, Royal Economic Society, vol. 130(630), pages 1541-1582.
    3. Denisa Gajdová & Helena Majdúchová, 2018. "Financial Sustainability Criteria and their testing in the conditions of the Slovak Non-Profit Sector," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 12(1), March.

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