Decentralized aid and democracy

Joaquín Morales Belpaire ()
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Joaquín Morales Belpaire: Universidad Privada Boliviana

No 116, Investigación & Desarrollo from Universidad Privada Boliviana

Abstract: This paper uses a model of vote over public finances to show that when nongovernmental organisations deliver development aid, beneficiaries have incentives to reduce electoral support for state-led redistribution. As a result, NGOs can crowd out governmental spending, turning private aid into a negative externality for the poor who do not directly benefit from it. I model the choice of a representative NGO, which faces a trade-off between targeting beneficiaries with higher needs, and reducing costs. I characterize the conditions under which this targeting affects the size of the externality and describe how it affects the welfare of beneficiaries and non-beneficiaries.

Keywords: Private Development Assistance; Democracy; Governance; NGOs; Nonprofits; Foreign Aid; Taxation; Public Goods. (search for similar items in EconPapers)
JEL-codes: C10 O10 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:iad:wpaper:0116

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