A Survey of the Theoretical Economic Literature on Foreign Aid

Elisabeth Paul

Asian-Pacific Economic Literature, 2006, vol. 20, issue 1, 1-17

Abstract: This paper surveys the theoretical economic literature on foreign aid—in particular, the aid donor–recipient relationship. Economic theory, especially new institutional economics, can be very helpful in understanding foreign aid relationships—especially the incentive problems involved—and in designing institutions to improve aid effectiveness. In particular, it helps in understanding the chain of principal–agent relations inherent in the aid delivery system and the resulting potential for agency problems. The survey shows that economic theory can improve the design of cooperation modalities by aligning the incentives of donors and recipients for poverty reduction, but that, in order to address the problems, policy analysis must take into account the constraints faced by stakeholders in the aid relationship. The aid ‘contract’ should thus seek to improve the agents’ incentives to use aid effectively, given the circumstances of the developing country.

Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://doi.org/10.1111/j.1467-8411.2006.00175.x

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:bla:apacel:v:20:y:2006:i:1:p:1-17

Ordering information: This journal article can be ordered from
https://ordering.onl ... 7-8411&ref=1467-8411

Access Statistics for this article

Asian-Pacific Economic Literature is currently edited by Yixiao Zhou

More articles in Asian-Pacific Economic Literature from The Crawford School, The Australian National University
Bibliographic data for series maintained by Wiley Content Delivery ().