Intermediation by Aid Agencies

Paul Seabright and Colin Rowat

No 4781, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This Paper models aid agencies as financial intermediaries that do not make a financial return to depositors, since the depositors' concern is to transfer resources to investor-beneficiaries. This leads to a significant problem of verification of the agencies' activities. One solution to this problem is for an agency to employ altruistic workers at below-market wages: workers can monitor the agency's activity more closely than donors, and altruistic workers would not work at below-market rates unless the agency were genuinely transferring resources to beneficiaries. We consider conditions for this solution to be incentive compatible.

Keywords: Signalling; Non-profit; Wage differential; Donations; altruism; Two-sided market (search for similar items in EconPapers)
JEL-codes: D21 D64 J31 L31 (search for similar items in EconPapers)
Date: 2004-12
New Economics Papers: this item is included in nep-lab and nep-mic
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Related works:
Journal Article: Intermediation by aid agencies (2006)
Working Paper: Intermediation by aid agencies (2005)
Working Paper: Intermediation by aid agencies (2004)
Working Paper: Intermediation by aid agencies (2004)
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