Decentralized Aid and Democracy
The last three decades have seen an important surge of the non-governmental sector in the provision of foreign aid. Using NGOs to deliver aid can be a solution to bypass corrupt authorities, avoiding that aid resources are captured by local elites. However NGOs may also act as surrogates for governmental provision of public goods. This implies that citizens make their own governments less accountable. In democratic countries, this can reduce electoral support for provision of public services by the state and harm the poor that don't directly benefit from the NGOs' projects. We develop a theoretical model of vote over public finances to analytically characterise the effect of decentralised aid on welfare. We find that non-governmental aid can harm the poor, weaken governance and aggravate inequalities by crowding-out governmental expenditures. These inefficiencies occur even in a flawless institutional context. We also find that the crowding-out effect can be mitigated if NGOs target countries with low income inequalities or by focusing on humanitarian-oriented missions.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.fundp.ac.be/en/eco
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Doucouliagos , H. & Paldam, M., 2007.
"The aid effectiveness literature: The sad results of 40 years of research,"
Cambridge Working Papers in Economics
0773, Faculty of Economics, University of Cambridge.
- Hristos Doucouliagos & Martin Paldam, 2009. "The Aid Effectiveness Literature: The Sad Results Of 40 Years Of Research," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 433-461, 07.
- Hristos Doucouliagos & Martin Paldam, 2005. "The Aid Effectiveness Literature. The Sad Result of 40 Years of Research," Economics Working Papers 2005-15, School of Economics and Management, University of Aarhus.
- Channing, Arndt & Jones, Sam & Tarp, Finn, 2010.
"Aid, Growth, and Development Have We Come Full Circle?,"
Working Paper Series
wp2010-96, World Institute for Development Economic Research (UNU-WIDER).
- Arndt Channing & Jones Sam & Tarp Finn, 2010. "Aid, Growth, and Development: Have We Come Full Circle?," Journal of Globalization and Development, De Gruyter, vol. 1(2), pages 1-29, December.
- Herzer, Dierk & Nunnenkamp, Peter, 2012.
"The effect of foreign aid on income inequality: Evidence from panel cointegration,"
Structural Change and Economic Dynamics,
Elsevier, vol. 23(3), pages 245-255.
- Dierk Herzer, Peter Nunnenkamp, 2012. "The Effect of Foreign Aid on Income Inequality: Evidence from Panel Cointegration," Kiel Working Papers 1762, Kiel Institute for the World Economy.
- Torsten Persson & Guido Tabellini, 2002. "Political Economics: Explaining Economic Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661314, June.
- Burnside, Craig & Dollar, David, 1997.
"Aid, policies, and growth,"
Policy Research Working Paper Series
1777, The World Bank.
- Svensson, Jakob, 1998.
"Foreign aid and rent-seeking,"
Policy Research Working Paper Series
1880, The World Bank.
- Tseday Jemaneh Mekasha & Finn Tarp, 2011.
"Aid and Growth What Meta-Analysis Reveals,"
Working Paper Series
UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).
- Agnar Sandmo, 1980. "Anomaly and Stability in the Theory of Externalities," The Quarterly Journal of Economics, Oxford University Press, vol. 94(4), pages 799-807.
- Alesina, Alberto & Perotti, Roberto, 1996.
"Income distribution, political instability, and investment,"
European Economic Review,
Elsevier, vol. 40(6), pages 1203-1228, June.
- Alberto Alesina & Roberto Perotti, 1993. "Income Distribution, Political Instability, and Investment," NBER Working Papers 4486, National Bureau of Economic Research, Inc.
- Simeon Djankov & José G. Montalvo & Marta Reynal-Querol, 2005.
"The curse of aid,"
257, Barcelona Graduate School of Economics.
- Timothy Besley & Stephen Coate, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 85-114.
- Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
- Ghazala Mansuri & Vijayendra Rao, 2013. "Localizing Development : Does Participation Work?," World Bank Publications, The World Bank, number 11859.
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, July.
- Alberto Chong & Mark Gradstein & Cecilia Calderon, 2009. "Can foreign aid reduce income inequality and poverty?," Public Choice, Springer, vol. 140(1), pages 59-84, July.
- Paul Mosley & John Hudson & Arjan Verschoor, 2004. "Aid, Poverty Reduction and the 'New Conditionality'," Economic Journal, Royal Economic Society, vol. 114(496), pages F217-F243, 06.
- Mark McGillivray & Simon Feeny & Niels Hermes & Robert Lensink, 2006. "Controversies over the impact of development aid: it works; it doesn't; it can, but that depends …," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(7), pages 1031-1050.
- Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, vol. 32(2-3), pages 542-550, March.
- Anna Fruttero & Varun Gauri, 2005. "The Strategic Choices of NGOs: Location Decisions in Rural Bangladesh," Journal of Development Studies, Taylor & Francis Journals, vol. 41(5), pages 759-787.
- Christy Cannon Lorgen, 1998. "Dancing with the state: the role of NGOs in health care and health policy," Journal of International Development, John Wiley & Sons, Ltd., vol. 10(3), pages 323-339.
- William Easterly, 2002. "The cartel of good intentions: The problem of bureaucracy in foreign aid," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 5(4), pages 223-250.
- Koch, Dirk-Jan, 2007. "Blind Spots on the Map of Aid Allocations: Concentration and Complementarity of International NGO Aid," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
When requesting a correction, please mention this item's handle: RePEc:nam:wpaper:1212. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-H�l�ne Mathieu)
If references are entirely missing, you can add them using this form.