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Good Governance and Good Aid Allocation

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  • Gil S. Epstein

    () (Bar-Ilan University)

  • Ira N. Gang

    () (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

  • Gil S. Epstein & Ira N. Gang, 2006. "Good Governance and Good Aid Allocation," Departmental Working Papers 200627, Rutgers University, Department of Economics.
  • Handle: RePEc:rut:rutres:200627
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    References listed on IDEAS

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    1. Mumtaz Anwar & Katharina Michaelowa, 2006. "The Political Economy of US Aid to Pakistan," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 195-209, May.
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    Citations

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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. Terence M. Garrett & Arthur Sementelli, 2012. "Knowledge production: public management and the market spectacle," International Journal of Social Economics, Emerald Group Publishing, vol. 39(7), pages 456-473, June.
    5. Brech, Viktor & Potrafke, Niklas, 2014. "Donor ideology and types of foreign aid," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 61-75.
    6. Prabir De, 2010. "Governance, Institutions, and Regional Infrastructure in Asia," Working Papers id:3029, eSocialSciences.
    7. 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.
    8. Prabir De, 2010. "Does Governance Matter for Enhancing Trade? Empirical Evidence from Asia," Governance Working Papers 22792, East Asian Bureau of Economic Research.
    9. repec:eee:ecolec:v:146:y:2018:i:c:p:435-446 is not listed on IDEAS
    10. Prabir De, 2010. "Governance, Institutions, and Regional Infrastructure in Asia," Governance Working Papers 22878, East Asian Bureau of Economic Research.
    11. Gil S. Epstein & Ira N. Gang, 2014. "Making Aid Work: Governance and Decentralization," Working Papers 2014-11, Bar-Ilan University, Department of Economics.
    12. Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, Elsevier.
    13. 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.
    14. 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).

    More about this item

    Keywords

    foreign aid; governance; rent seeking; decentralization;

    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

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