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Aid Effectiveness Revisited, Part 2: The Trade-off Between Needs and Governance

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NOPOOR WP#4_N°29_Aid Effectiveness Revisited, Part 2 The Trade-off Between Needs and Governance.pdf (963.1Kb)
Date
2015-08
Collection title
NOPOOR Working Paper
Collection Id
29
Dewey
Croissance et développement économiques
Sujet
Aid
JEL code
D.D0.D02; D.D8.D86; O.O2.O22; F.F3.F35
URI
https://basepub.dauphine.fr/handle/123456789/17702
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
43
Abstract (EN)
This paper constitutes the second stage of our effort to elucidate the mechanism of inter-country aid allocation by a single donor when the latter is sensitive to both needs and governance considerations and is moreover able to influence local governance through its own disciplining effort. In conformity with observations from the real world, it is also assumed that there is a negative correlation between the extent of needs and the quality of governance: in a one-donor-two-recipient framework, the poorer recipient country is less well governed than the richer one. Many rich insights are gained from the analysis. In particular, the poorer and less well governed country is more likely to receive a higher share of aid if governance is endogenized. And the share of a country will always increase if it has succeeded in improving its internal governance thanks to its own effort. This is true even in the case where this effort leads to a fall of aggregate governance as a result of an over-reaction by the donor. Finally, a decrease in the cost of external discipline will favor the poorer and less well governed country provided that the inter-country governance gap is large enough.

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