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Funding, Competition and the Efficiency of NGOs: An Empirical Analysis of Non-charitable Expenditure of US NGOs Engaged in Foreign Aid

  • Peter Nunnenkamp

    (Kiel Institute for the World Economy)

  • Hannes Öhler

    (Georg-August-University Göttingen)

We assess the determinants of the wide variation in the efficiency of foreign aid activities across US-based non-governmental organizations (NGOs). In particular, we analyze whether non-charitable expenditures for administration, management and fundraising depend on the intensity of competition among NGOs and on the degree to which they are refinanced by governments. We control for NGO heterogeneity in various dimensions as well as major characteristics of recipient countries. We find that fiercer competition is associated with more efficient foreign aid activities of NGOs, rather than leading to “excessive” fundraising. Official funding tends to increase administrative costs. Nevertheless, officially financed NGOs spend relatively more on charitable activities since they are less concerned with collecting private donations through fundraising efforts.

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File URL: http://www2.vwl.wiso.uni-goettingen.de/courant-papers/CRC-PEG_DP_38.pdf
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Paper provided by Courant Research Centre PEG in its series Courant Research Centre: Poverty, Equity and Growth - Discussion Papers with number 38.

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Date of creation: 29 Jul 2010
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Handle: RePEc:got:gotcrc:038
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  1. Axel Dreher & Peter Nunnenkamp & Susann Thiel & Rainer Thiele, 2010. "Aid Allocation by German NGOs: Does the Degree of Public Refinancing Matter?," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 23, Courant Research Centre PEG.
  2. Suzanne McCoskey, 2005. "NGOs in the Aid Community: Do Funding Source or Economic Conditioning Matter to Decisions of Country Involvement?," Development and Comp Systems 0508004, EconWPA.
  3. Rose-Ackerman, Susan, 1982. "Charitable Giving and "Excessive" Fundraising," The Quarterly Journal of Economics, MIT Press, vol. 97(2), pages 193-212, May.
  4. J. Kornai & E. Maskin & G. Roland., 2004. "Understanding the Soft Budget Constraint," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 11.
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  7. Edward L. Glaeser & Andrei Shleifer, 1998. "Not-For-Profit Entrepreneurs," NBER Working Papers 6810, National Bureau of Economic Research, Inc.
  8. Edwards, Michael & Hulme, David, 1996. "Too close for comfort? the impact of official aid on nongovernmental organizations," World Development, Elsevier, vol. 24(6), pages 961-973, June.
  9. James Andreoni & A. Abigail Payne, 2003. "Do Government Grants to Private Charities Crowd Out Giving or Fund-raising?," American Economic Review, American Economic Association, vol. 93(3), pages 792-812, June.
  10. Aldashev, Gani & Verdier, Thierry, 2007. "Internationalization of NGOs and Competition on Markets for Development Donations," CEPR Discussion Papers 6511, C.E.P.R. Discussion Papers.
  11. Arnab Acharya & Ana Teresa Fuzzo de Lima & Mick Moore, 2006. "Proliferation and fragmentation: Transactions costs and the value of aid," Journal of Development Studies, Taylor & Francis Journals, vol. 42(1), pages 1-21.
  12. Jeremy Thornton, 2008. "Competition, Contractibility, and the Market for Donors to Nonprofits," Journal of Law, Economics and Organization, Oxford University Press, vol. 24(1), pages 215-246, May.
  13. Riber, D.C. & Wilhelm, M.O., 1996. "Altruistic and Joy-of-Giving Motivations in Charitable Behavior," Papers 1-96-4, Pennsylvania State - Department of Economics.
  14. Payne, A. Abigail, 1998. "Does the government crowd-out private donations? New evidence from a sample of non-profit firms," Journal of Public Economics, Elsevier, vol. 69(3), pages 323-345, September.
  15. Aldashev, Gani & Verdier, Thierry, 2010. "Goodwill bazaar: NGO competition and giving to development," Journal of Development Economics, Elsevier, vol. 91(1), pages 48-63, January.
  16. Khanna, Jyoti & Sandler, Todd, 2000. "Partners in giving:: The crowding-in effects of UK government grants," European Economic Review, Elsevier, vol. 44(8), pages 1543-1556, August.
  17. Rachel M. McCleary & Robert J. Barro, 2006. "U.S.-Based Private Voluntary Organizations: Religious and Secular PVOs Engaged in International Relief & Development," NBER Working Papers 12238, National Bureau of Economic Research, Inc.
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