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Rents and the Political Economy of Development Aid

Listed author(s):
  • Hagen, Rune Jansen

    ()

    (Department of Economics, University of Bergen)

Empirical studies suggest little impact of foreign aid on growth on average. As aid can be viewed as a sovereign rent akin to natural resource rents, it is likely that rent seeking plays a role in explaining this disappointing outcome. The analytic starting point of this paper is the long chain of agents connecting donors in rich countries with beneficiaries in poor countries, making aid a contestable rent for recipients at both the international and the domestic levels. Thus, rent seeking can distract attention and divert resources from more important sources of long-term progress. Moreover, there are serious incentive problems on the donor side of the relationship. Empirically, the effects seem quite heterogeneous and hence more research is needed to further our understanding of this complex system.

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Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 07/14.

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Length: 47 pages
Date of creation: 06 Nov 2014
Publication status: Forthcoming in Companion to the Political Economy of Rent Seeking, Congleton, Roger D., Hillman, Arye L. (eds.), Edward Elgar Publishing.
Handle: RePEc:hhs:bergec:2014_007
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Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway

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