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Making Aid Work: Governance and Decentralization

Listed author(s):
  • 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)

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.

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File URL: http://www.sas.rutgers.edu/virtual/snde/wp/2015-20.pdf
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Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 201520.

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Length: 22 pages
Date of creation: 25 Nov 2015
Publication status: Published as: Epstein, G., & Gang, I. (2015). "Making aid work: governance and decentralization". In Handbook on the Economics of Foreign Aid. Edited by B. Mak Arvin and Byron Lew. Cheltenham, UK: Edward Elgar Publishing. Retrieved Nov 24, 2015, from http://www.elgaronline.com/view/9781783474578.00039.xml.
Handle: RePEc:rut:rutres:201520
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  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. Brech, Viktor & Potrafke, Niklas, 2014. "Donor ideology and types of foreign aid," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 61-75.
  3. Martens,Bertin & Mummert,Uwe & Murrell,Peter & Seabright,Paul, 2008. "The Institutional Economics of Foreign Aid," Cambridge Books, Cambridge University Press, number 9780521055390, March.
  4. 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.
  5. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, 03.
  6. Ellingsen, Tore, 1991. "Strategic Buyers and the Social Cost of Monopoly," American Economic Review, American Economic Association, vol. 81(3), pages 648-657, June.
  7. 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.
  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, 07.
  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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