Special Interest Politics and Aid Fungibility

Sajal Lahiri and Pascalis Raimondos ()

No 2482, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a political-economic model of aid fungibility. A donor country gives aid to a recipient government for the benefit of a target group. However, the recipient government accepts political contributions from a lobby group not targeted by the donor and transfers a fraction of the aid to the non-target group. The size of this fraction is determined endogenously in the political equilibrium in the recipient country. We examine how the donor's behaviour affects the equilibrium, and how changes in the parameters of the model affect the total amount of aid and the proportion of it reaching the target group.

Keywords: Politics; Foreign aid; Fungibility; Lobbying (search for similar items in EconPapers)
JEL-codes: F11 F35 O0 (search for similar items in EconPapers)
Date: 2000-06
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Citations: View citations in EconPapers (2)

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Working Paper: Special interest politics and aid fungibility (1999)
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