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Making Aid Work: Governance and Decentralization

Author

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  • Gil S. Epstein

    () (Department of Economics, Bar Ilan University, Ramat Gan; IZA, Bonn; CReAM, London)

  • Ira N. Gang

    () (Department of Economics, Rutgers University; IZA, Bonn; CReAM, London; IOS, Regensburg)

Abstract

Donor aid organizations (DAOs) are multi-layered and multi-dimensional bureaucracies with many departments trying to find solutions to problems for countries, investing staff resources and effort into having an effect. A department may come into conflict with other departments because of personal and other rivalries, at least partly overlapping jurisdictions, and/or the bureaucratic necessity of laying claim to having the bigger impact. The idea here is that good governance starts at home. We consider how inter-departmental competition within the DAO affects departments’ efforts and the DAO’s performance measured by its ability to maximize effort towards helping a client country. In short, we wish to see how alternative reward systems which DAOs may put into place motivate competing departments in implementing the organization’s goals. The argument for establishing good governance criteria is as much to put constraints on donor behavior as on the necessity of properly acting recipients.

Suggested Citation

  • Gil S. Epstein & Ira N. Gang, 2015. "Making Aid Work: Governance and Decentralization," Departmental Working Papers 201520, Rutgers University, Department of Economics.
  • Handle: RePEc:rut:rutres:201520
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    References listed on IDEAS

    as
    1. Lahiri, Sajal & Raimondos-Moller, Pascalis, 2000. "Lobbying by Ethnic Groups and Aid Allocation," Economic Journal, Royal Economic Society, vol. 110(462), pages 62-79, March.
    2. Epstein, Gil S. & Gang, Ira N., 2009. "Good governance and good aid allocation," Journal of Development Economics, Elsevier, vol. 89(1), pages 12-18, May.
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    4. Martens,Bertin & Mummert,Uwe & Murrell,Peter & Seabright,Paul, 2008. "The Institutional Economics of Foreign Aid," Cambridge Books, Cambridge University Press, number 9780521055390.
    5. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, March.
    6. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1993. "Rigging the Lobbying Process: An Application of the All-Pay Auction," American Economic Review, American Economic Association, vol. 83(1), pages 289-294, March.
    7. Ellingsen, Tore, 1991. "Strategic Buyers and the Social Cost of Monopoly," American Economic Review, American Economic Association, vol. 81(3), pages 648-657, June.
    8. Sajal Lahiri & Pascalis Raimondos-Møller, 2004. "Donor Strategy under the Fungibility of Foreign Aid," Economics and Politics, Wiley Blackwell, vol. 16(2), pages 213-231, July.
    9. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
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    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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