Multilateral Aid Agencies and Strategic Donor Behaviour
The paper builds on recent empirical evidence on the importance of strategic donor behaviour in aid allocation in order to develop a theoretical model where donor pressure on a recipient for influencing the aid disbursement of a multilateral institution is endogenously determined. Our game-theoretic, multi-agent model with one aid recipient, two bilateral donors and one multilateral institution illustrates the advantage of putting pressure on the recipient as an instrument for foreign policy, as seen from the mighty donor's point of view. The model shows how this strategic donor behaviour is damaging to the aid-recipient; we also show that other donors not sharing foreign policy goals similar to the strategic, influential donors will, in fact, reduce their aid contributions to the multilateral organizations. This may obviously have profound implications for the volume of total aid flows and may crucially undermine current efforts to substantially increase ODA to meet the Millennium Development Goals by 2015. Our paper also contributes to the common debate on foreign aid by presenting a rigorous model that explains the coexistence of both multilateral aid organizations and bilateral aid programmes.
|Date of creation:||2006|
|Contact details of provider:|| Postal: Katajanokanlaituri 6B, 00160 Helsinki|
Web page: http://www.wider.unu.edu/
More information through EDIRC
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.:
- Hansen, Henrik & Tarp, Finn, 1999.
"Aid Effectiveness Disputed,"
62290, University Library of Munich, Germany.
- Alesina, Alberto & Dollar, David, 2000.
"Who Gives Foreign Aid to Whom and Why?,"
Journal of Economic Growth,
Springer, vol. 5(1), pages 33-63, March.
- Dollar, David & Alesina, Alberto, 2000. "Who Gives Foreign Aid to Whom and Why?," Scholarly Articles 4553020, Harvard University Department of Economics.
- Alberto Alesina & David Dollar, 1998. "Who Gives Foreign Aid to Whom and Why?," NBER Working Papers 6612, National Bureau of Economic Research, Inc.
- Paul Collier & David Dollar, 2004. "Development effectiveness: what have we learnt?," Economic Journal, Royal Economic Society, vol. 114(496), pages 244-271, 06.
- P. Guillaumont & L. Chauvet, 2001.
"Aid and Performance: A Reassessment,"
Journal of Development Studies,
Taylor & Francis Journals, vol. 37(6), pages 66-92.
- Lin, Tun & Mavrotas, George, 2004. "A Contract Perspective on the International Finance Facility," WIDER Working Papers 060, World Institute for Development Economic Research (UNU-WIDER).
- Hansen, Henrik & Tarp, Finn, 2000.
"Aid and Growth Regressions,"
62288, University Library of Munich, Germany.
- Basu, Kaushik, 2000.
"Prelude to Political Economy: A Study of the Social and Political Foundations of Economics,"
Oxford University Press, number 9780198296713, December.
- Basu, Kaushik, 2003. "Prelude to Political Economy: A Study of the Social and Political Foundations of Economics," OUP Catalogue, Oxford University Press, number 9780199261857, December.
- Dalgaard, Carl-Johan & Hansen, Henrik & Tarp, Finn, 2002.
"On the Empirics of Foreign Aid and Growth,"
63696, University Library of Munich, Germany.
- Trumbull, William N & Wall, Howard J, 1994. "Estimating Aid-Allocation Criteria with Panel Data," Economic Journal, Royal Economic Society, vol. 104(425), pages 876-882, July.
- Espen Villanger, 2003.
"Company influence on foreign aid disbursement: Is conditionality credible when donors have mixed motives?,"
CMI Working Papers
WP 2003:4, CMI (Chr. Michelsen Institute), Bergen, Norway.
- Espen Villanger, 2004. "Company Influence on Foreign Aid Disbursement: Is Conditionality Credible when Donors Have Mixed Motives?," Southern Economic Journal, Southern Economic Association, vol. 71(2), pages 334-351, October.
- Finn Tarp, 2006.
"Aid and Development,"
06-12, University of Copenhagen. Department of Economics.
- Burnside, Craig & Dollar, David, 1997.
"Aid, policies, and growth,"
Policy Research Working Paper Series
1777, The World Bank.
- Maizels, Alfred & Nissanke, Machiko K., 1984. "Motivations for aid to developing countries," World Development, Elsevier, vol. 12(9), pages 879-900, September.
- Burnell, Peter, 2004. "Foreign Aid Resurgent: New Spirit or Old Hangover?," WIDER Working Papers 044, World Institute for Development Economic Research (UNU-WIDER).
- Villanger, Espen, 2006. "Company interests and foreign aid policy: Playing donors off against one another," European Economic Review, Elsevier, vol. 50(3), pages 533-545, April.
- Michael A. Clemens & Steven Radelet, 2003. "The Millennium Challenge Account: How Much is Too Much, How Long is Long Enough?," Working Papers 23, Center for Global Development.
- Kanbur, Ravi, 2006.
"The economics of international aid,"
Handbook on the Economics of Giving, Reciprocity and Altruism,
- Azam, Jean-Paul & Laffont, Jean-Jacques, 2003. "Contracting for aid," Journal of Development Economics, Elsevier, vol. 70(1), pages 25-58, February.
- Murshed, S Mansoob & Sen, Somnath, 1995. "Aid Conditionality and Military Expenditure Reduction in Developing Countries: Models of Asymmetric Information," Economic Journal, Royal Economic Society, vol. 105(429), pages 498-509, March.
- Robert Lensink & Howard White, 2000. "Assessing Aid: A Manifesto for Aid in the 21st Century?," Oxford Development Studies, Taylor & Francis Journals, vol. 28(1), pages 5-18.
- Eric Neumayer, 2003. "What Factors Determine the Allocation of Aid by Arab Countries and Multilateral Agencies?," Journal of Development Studies, Taylor & Francis Journals, vol. 39(4), pages 134-147.
- Torsvik, Gaute, 2005. "Foreign economic aid; should donors cooperate?," Journal of Development Economics, Elsevier, vol. 77(2), pages 503-515, August.
- P. Lundborg, 1998. "Foreign Aid and International Support as a Gift Exchange," Economics and Politics, Wiley Blackwell, vol. 10(2), pages 127-142, 07.
- White, Howard, 2004. "Trends in the volume and allocation of official flows from donor countries," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 233-244.
- Espen Villanger, 2004. "Powerful donors and foreign policy: The role of multilateral financial institutions," CMI Working Papers WP 2004: 12, CMI (Chr. Michelsen Institute), Bergen, Norway.
When requesting a correction, please mention this item's handle: RePEc:unu:wpaper:dp2006-02. 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: (Mauricio Roa Grisales)
If references are entirely missing, you can add them using this form.