Is International Funding Crowding Out Charitable Contributions in African NGOs?

Marcel Fafchamps, Trudy Owens and University of Nottingham

No GPRG-WPS-, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: Using original Ugandan data collected by the authors, we examine the determinants of funding to local NGOs. We begin by presenting a simple theoretical model of crowding out. We then turn to the empirical estimation. We find that success in attracting grants from international donors depends mostly on network effects. In contrast, NGOs that raise in kind resources locally tend to be young NGOs managed by someone who is simultaneously employed elsewhere. We find evidence from crowding out: NGOs that receive grant funding are less likely to obtain resources locally, whether in cash or in kind. But crowding out seems to be primarily the result of selection: once we control for NGO fixed effects, we find no evidence that NGOs receive less revenue from fees and donation after obtaining a grant. These results suggest that donors regard Uganan NGOs as sub-contractors of their developmental effort, not as charitable organizations in their own right.

Date: 2006-02-01
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