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Foreign Aid in the Presence of Corruption: Differential Games among Donors

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  • Murray C. Kemp
  • Ngo Van Long

Abstract

We consider two dynamic games of foreign aid. Model 1 deals with the case where donor countries continually feel the warm glow from the act of giving. Model 2 postulates that donors will stop giving aid when a target level of development is reached. In Model 1, there are multiple equilibria that can be Pareto ranked. In Model 2, the equilibrium strategies are nonlinear functions of the level of development. The flow of aid falls at a faster and faster rate as the target is approached. An increase in corruption will increase the flow of aid.

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  • Murray C. Kemp & Ngo Van Long, 2009. "Foreign Aid in the Presence of Corruption: Differential Games among Donors," Review of International Economics, Wiley Blackwell, vol. 17(2), pages 230-243, May.
    • Handle: RePEc:bla:reviec:v:17:y:2009:i:2:p:230-243
    DOI: 10.1111/j.1467-9396.2009.00820.x
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    Cited by:

    1. Luca Colombo & Paola Labrecciosa & Agnieszka Rusinowska, 2022. "A Dynamic Analysis of Criminal Networks," Documents de travail du Centre d'Economie de la Sorbonne 22006r, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Jun 2023.
    2. David Fielding, 2011. "Health aid and governance in developing countries," Health Economics, John Wiley & Sons, Ltd., vol. 20(7), pages 757-769, July.
    3. Ahsan Kibria & Reza Oladi & Ryan Bosworth, 2021. "Political economy of aid allocation: The case of Arab donors," The World Economy, Wiley Blackwell, vol. 44(8), pages 2460-2495, August.

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