Development Aid in the Presence of Corruption: Differential Games among Donors

Murray Kemp and Ngo Long

CIRANO Working Papers from CIRANO

Abstract: In this paper, we complement the work of Kemp and Shimomura (2002) by considering the case of many donors playing a dynamic non-cooperative game of foreign aid. We consider two models. Model 1 deals with the case where donor countries continually feel the warm glow of from the act of giving. Model 2 postulates that donors will stop giving aid when a target level of development is reached. One of the main results of Model 1 is that there are multiple equilibria that can be Pareto ranked. Another interesting result is that an increase in the level of corruption in the recipient country will reduce the aid level of the low aid equilibrium, but increase that of the high aid equilibrium. In Model 2, the equilibrium strategies are non-linear functions of the level of development. The flow of aid falls at a faster and faster rate as the target is approached. An increase in corruption will increase the flow of aid in this model. On présente deux modèles d'aide internationale dans lesquels deux pays avancés s'engagent dans un jeu dynamique. Dans le premier modèle, les aides apportent aux donateurs des gains moraux. On montre qu'une hausse de la corruption du pays sous-développé peut augmenter les aides. Il y a une multiplicité d'équilibres de Nash, qui peuvent être ordonnés sous le critère de Pareto. Dans le deuxième modèle, les pays donateurs cessent de donner aussitôt que le niveau du développement atteint un but fixé. On montre que l'équilibre de ce modèle implique que le flux d'aide devient de plus en plus faible au fur et à mesure que le niveau de développement s'approche du but fixé. Les pays avancés donnent plus si le taux de corruption augmente.

Keywords: development aid; corruption; dynamic games; differential games; aide internationale; corruption; jeux dynamiques; jeux différentiels (search for similar items in EconPapers)
JEL-codes: O11 (search for similar items in EconPapers)
Date: 2007-11-01
New Economics Papers: this item is included in nep-dev and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cirano.qc.ca/files/publications/2007s-23.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2007s-23

Access Statistics for this paper

More papers in CIRANO Working Papers from CIRANO Contact information at EDIRC.
Bibliographic data for series maintained by Webmaster ().