The Hope for Hysteresis in Foreign Aid

Gil Epstein and Ira Gang

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: We argue that a purpose of foreign aid is to whet the appetite of the recipient in order to bring about a long term commitment to what the donor perceives as a need, but which the recipient may rank lower down on his list of undertakings, or may be sufficiently resource constrained as to be unable to start the project. In other words, we explore the implications and conditions for success of a donor trying to affect long-term recipient policy by creating path dependence. Once the project is established, aid can be removed without reversing the process that has been set in motion. Quite simply, the donor wants its project to stick. We place a formal structure on this.

Keywords: foreign aid; rent seeking; governance; decentralization (search for similar items in EconPapers)
JEL-codes: F35 O10 O19 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2006-12-01
New Economics Papers: this item is included in nep-dev and nep-ppm
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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:200628

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