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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
  • Hannes Öhler

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 – i.e., 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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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1640.

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Length: 25 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:kie:kieliw:1640
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  1. Edward L. Glaeser, 2002. "The Governance of Not-For-Profit Firms," NBER Working Papers 8921, National Bureau of Economic Research, Inc.
  2. Edward L. Glaeser & Andrei Shleifer, 1998. "Not-For-Profit Entrepreneurs," Harvard Institute of Economic Research Working Papers 1852, Harvard - Institute of Economic Research.
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  6. Axel Dreher & Peter Nunnenkamp & Susann Thiel & Rainer Thiele, 2010. "Aid Allocation by German NGOs: Does the Degree of Public Refinancing Matter?," KOF Working papers 10-247, KOF Swiss Economic Institute, ETH Zurich.
  7. 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.
  8. David C. Ribar & Mark O. Wilhelm, 2002. "Altruistic and Joy-of-Giving Motivations in Charitable Behavior," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 425-457, April.
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  10. repec:oup:qjecon:v:97:y:1982:i:2:p:193-212 is not listed on IDEAS
  11. 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.
  12. Eric Werker & Faisal Z. Ahmed, 2008. "What Do Nongovernmental Organizations Do?," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 73-92, Spring.
  13. 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.
  14. 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.
  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. 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.
  17. 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.
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