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Good Governance and Good Aid Allocation

Author

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  • Epstein, Gil S.

    (Bar-Ilan University)

  • Gang, Ira N.

    (Rutgers University)

Abstract

We model the aid allocation decision where the donor government has announced that good governance is the criterion for receiving aid. Potential recipients must compete for the aid funds. The structure of the competition is important to the donor in terms of achieving good governance, and to the recipients in terms of what they receive. The leaders of potential recipient countries look at aid availability through this contest as part of the competing objectives they face – some good, some not good. The donor country prefers a contest under which the aid will only go to one country while the leaders of the receiving countries prefer that each country obtains the proportion of aid relative to its governance quality. If poverty reduction is an independent goal as well, a poverty trap may be created. With good governance as a criterion, donors may work through both bilateral and multilateral agencies.

Suggested Citation

  • Epstein, Gil S. & Gang, Ira N., 2008. "Good Governance and Good Aid Allocation," IZA Discussion Papers 3585, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3585
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    References listed on IDEAS

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    Cited by:

    1. Gaoussou Diarra & Patrick Plane, 2014. "Assessing the World Bank's Influence on the Good Governance Paradigm," Oxford Development Studies, Taylor & Francis Journals, vol. 42(4), pages 473-487, December.
    2. Gil S. Epstein & Ira N. Gang, 2010. "A Political Economy of the Immigrant Assimilation: Internal Dynamics," Working Papers 2010-13, Bar-Ilan University, Department of Economics.
    3. Carter, Patrick, 2014. "Aid allocation rules," European Economic Review, Elsevier, vol. 71(C), pages 132-151.
    4. Brech, Viktor & Potrafke, Niklas, 2014. "Donor ideology and types of foreign aid," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 61-75.
    5. Prabir De, 2010. "Governance, Institutions, and Regional Infrastructure in Asia," Working Papers id:3029, eSocialSciences.
    6. Gil S. Epstein & Yosef Mealem & Shmuel Nitzan, 2013. "Lotteries vs. All-Pay Auctions in Fair and Biased Contests," Economics and Politics, Wiley Blackwell, vol. 25(1), pages 48-60, March.
    7. Prabir De, 2010. "Does Governance Matter for Enhancing Trade? Empirical Evidence from Asia," Governance Working Papers 22792, East Asian Bureau of Economic Research.
    8. Prabir De, 2010. "Governance, Institutions, and Regional Infrastructure in Asia," Governance Working Papers 22878, East Asian Bureau of Economic Research.
    9. Gil S. Epstein & Ira N. Gang, 2014. "Making Aid Work: Governance and Decentralization," Working Papers 2014-11, Bar-Ilan University, Department of Economics.
    10. Magnusson, Leandro M. & Tarverdi, Yashar, 2020. "Measuring governance: Why do errors matter?," World Development, Elsevier, vol. 136(C).
    11. Natalie Struwe & James M. Walker & Esther Blanco, 2021. "Competition Among Public Good Providers for Donor Rewards," Working Papers 2021-29, Faculty of Economics and Statistics, Universität Innsbruck.
    12. Lawrence Sáez, 2013. "Methods in governance research: a review of research approaches," Global Development Institute Working Paper Series esid-017-13, GDI, The University of Manchester.
    13. Prabir De, 2011. "Do institutions matter for trade in Asian countries?," STUDIES IN TRADE AND INVESTMENT, in: Trade-led growth: A sound strategy for Asia, chapter 9, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    14. Yoojin Lim & Youngwan Kim & Daniel Connolly, 2023. "Assessing the impact of aid on public health expenditure in aid recipient countries," Development Policy Review, Overseas Development Institute, vol. 41(1), January.
    15. Terence M. Garrett & Arthur Sementelli, 2012. "Knowledge production: public management and the market spectacle," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 39(7), pages 456-473, June.
    16. Axel Dreher & Jenny Simon & Justin Valasek, 2021. "Optimal decision rules in multilateral aid funds," The Review of International Organizations, Springer, vol. 16(3), pages 689-719, July.
    17. Chambers, Paul E. & Glenn Dutcher, E. & Mark Isaac, R., 2018. "Improving Environmental Quality Through Aid: An Experimental Analysis of Aid Structures With Heterogeneous Agents," Ecological Economics, Elsevier, vol. 146(C), pages 435-446.
    18. Natalie Struwe & Esther Blanco & James M. Walker, 2024. "Competition among public good providers for donor rewards," Experimental Economics, Springer;Economic Science Association, vol. 27(1), pages 215-243, March.
    19. Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4415-4523, Elsevier.
    20. Arnaud Goussebaïle & Antoine Bommier & Amélie Goerger & Jean-Philippe Nicolaï, 2023. "Altruistic Foreign Aid and Climate Change Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(1), pages 219-239, January.

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    More about this item

    Keywords

    governance; decentralization; rent seeking; foreign aid;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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