STRATEGIC INTERACTION, AID EFFECTIVENESS AND THE FORMATION OF AID POLICIES IN DONOR NATIONS

S. Mansoob Murshed
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S. Mansoob Murshed: Utrecht School of Economics and the Institute of Social Studies, Utrecht University

Journal of Economic Development, 2003, vol. 28, issue 1, 189-203

Abstract: This paper examines some of the issues associated with the aid donor process arising from the theory of agency or principal-agent models and endogenous policy determination. The principals may be viewed as legislators and the agents as the aid agency. In addition to adverse selection and moral hazard the paper considers intrinsic sources of motivation for agents and the trade-off between adverse selection and moral hazard. It also considers multiple task agents, and situations where there are many principals with divergent objectives. The principals might be better off by making the tasks more complementary and trading in their differing objectives. The paper also considers the determinants of sustaining compromise over aid policies when different political factions in donor nations have competing interests with regard to recipients or overall aid strategy.

Keywords: Aid Effectiveness; Political Processes; Endogenous Policy Formation (search for similar items in EconPapers)
JEL-codes: H60 O11 O12 O19 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:28:y:2003:i:1:p:189-203

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