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A Model of NGO Regulation with an Application to Uganda

  • Burger, Ronelle

    ()

    (Stellenbosch University)

  • Dasgupta, Indraneel

    ()

    (Indian Statistical Institute)

  • Owens, Trudy

    ()

    (University of Nottingham)

We develop a model of regulation of service-delivery 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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6221.

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Length: 24 pages
Date of creation: Dec 2011
Date of revision:
Publication status: forthcoming in: Economic Development and Cultural Change, 2015
Handle: RePEc:iza:izadps:dp6221
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  1. repec:cup:cbooks:9780521808187 is not listed on IDEAS
  2. Spiros Bougheas & Indraneel Dasgupta & Oliver Morrissey, 2011. "Repayment versus Investment Conditions and Exclusivity in Lending Contracts," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(2), pages 247-265, June.
  3. 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.
  4. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  5. Spiros Bougheas & Indraneel Dasgupta & Oliver Morrissey, 2007. "Tough love or unconditional charity?," Oxford Economic Papers, Oxford University Press, vol. 59(4), pages 561-582, October.
  6. Barr, Abigail & Fafchamps, Marcel & Owens, Trudy, 2005. "The governance of non-governmental organizations in Uganda," World Development, Elsevier, vol. 33(4), pages 657-679, April.
  7. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-59, January.
  8. Guriev, Sergei, 2003. "Red Tape and Corruption," CEPR Discussion Papers 3972, C.E.P.R. Discussion Papers.
  9. Robinson, Mark & Riddell, Roger C., 1995. "Non-Governmental Organizations and Rural Poverty Alleviation," OUP Catalogue, Oxford University Press, number 9780198233305, March.
  10. 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.
  11. 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.
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