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Aid Effectiveness Revisited, Part 1: Optimal Discipline in Donor-Recipient Relationships

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NOPOOR WP#4_N°28_Aid Effectiveness Revisited, Part 1 Optimal.pdf (634.5Kb)
Date
2015-08
Collection title
NOPOOR Working Paper
Collection Id
28
Dewey
Croissance et développement économiques
Sujet
Aid; Elites
JEL code
F.F3.F35; O.O1.O12; D.D8.D86; D.D0.D02
URI
https://basepub.dauphine.fr/handle/123456789/17701
Collections
  • Projet Nopoor
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Author
Bourguignon, François
139754 Paris-Jourdan Sciences Economiques [PSE]
Platteau, Jean-Philippe
201973 Department of economics
Type
Document de travail / Working paper
Item number of pages
36
Abstract (EN)
This paper constitutes the first stage of an analysis of the problem of aid allocation when the donor is sensitive to both needs and governance considerations and is moreover able to influence local governance through its own disciplining effort. In this first stage, we write a principal-agent model of the relationship between a donor and a single recipient country. One key and original feature is the assumed comparability between domestic and donor-imposed disciplines: the two types can be summed up to obtain an aggregate discipline. We show that, paradoxically, an (exogenous) improvement of domestic discipline may be over-compensated by the donor so that total discipline actually decreases and elite capture increases. The relationship between domestic and total disciplines may thus be non-monotonous so that no simple general testable prediction can be inferred from economic theory regarding the impact of aid even controlling for domestic governance.

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