Donor Competition for Aid Impact, and Aid Fragmentation
This paper shows that donors that maximize relative aid impact spread their budgets across many recipient countries in a unique Nash equilibrium, explaining aid fragmentation. This equilibrium may be inefficient even without fixed costs, and the inefficiency increases in the equality of donors budgets. The paper presents empirical evidence consistent with theoretical results. These imply that, short of ending donors maximization of relative aid impact, agreements to better coordinate aid allocations are not implementable. Moreover, since policies to increase donor competition in terms of aid effectiveness risk reinforcing relativeness, they may well backfire, as any such reinforcement increases aid fragmentation.
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- Emmanuel Frot & Javier Santiso, 2011.
"Herding in Aid Allocation,"
Wiley Blackwell, vol. 64(1), pages 54-74, 02.
- Emmanuel Frot & Javier Santiso, 2009. "Herding in Aid Allocation," OECD Development Centre Working Papers 279, OECD Publishing.
- Frot, Emmanuel & Santiso, Javier, 2009. "Herding in Aid Allocation," SITE Working Paper Series 5, Stockholm Institute of Transition Economics, Stockholm School of Economics, revised 02 Oct 2009.
- Knack, Stephen & Rogers, F. Halsey & Eubank, Nicholas, 2011. "Aid Quality and Donor Rankings," World Development, Elsevier, vol. 39(11), pages 1907-1917.
- Knack, Stephen & Rogers, F. Halsey & Eubank, Nicholas, 2010. "Aid quality and donor rankings," Policy Research Working Paper Series 5290, The World Bank.
- William Easterly & Tobias Pfutze, 2008. "Where Does the Money Go? Best and Worst Practices in Foreign Aid," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 29-52, Spring.
- Svensson, Jakob, 2003. "Why conditional aid does not work and what can be done about it?," Journal of Development Economics, Elsevier, vol. 70(2), pages 381-402, April.
- Knack, Stephen & Rahman, Aminur, 2007. "Donor fragmentation and bureaucratic quality in aid recipients," Journal of Development Economics, Elsevier, vol. 83(1), pages 176-197, May.
- Knack,Stephen & Rahman, Aminur, 2004. "Donor fragmentation and bureaucratic quality in aid recipients," Policy Research Working Paper Series 3186, The World Bank.
- Easterly, William & Williamson, Claudia R., 2011. "Rhetoric versus Reality: The Best and Worst of Aid Agency Practices," World Development, Elsevier, vol. 39(11), pages 1930-1949.
- Easterly, William & Williamson, Claudia R., 2011. "Rhetoric versus reality: the best and worst of aid agency practices," MPRA Paper 39139, University Library of Munich, Germany.
- Annen Kurt & Kosempel Stephen, 2009. "Foreign Aid, Donor Fragmentation, and Economic Growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-32, August.
- Kurt Annen & Stephen Kosempel, 2009. "Foreign Aid, Donor Fragmentation, and Economic Growth," Working Papers 0914, University of Guelph, Department of Economics and Finance.
- Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance 0407010, EconWPA.
- Michael Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting Chickens When They Hatch: The Short-term Effect of Aid on Growth," Working Papers 44, Center for Global Development.
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