IDEAS home Printed from https://ideas.repec.org/p/chm/wpaper/wp2003-4.html
   My bibliography  Save this paper

Company influence on foreign aid disbursement: Is conditionality credible when donors have mixed motives?

Author

Listed:
  • Espen Villanger

Abstract

When donors enforce conditionality upon recipients who do not implement the conditions, companies can suffer from cancellation of their contracts with the recipient when aid dries up. A strategic recipient may avoid implementing controversial conditions by only granting a contract to a company that puts pressure on the donor to keep aid flowing. In our model, each of these three agents takes account of each of the two other agents' actions. We show that this triadic structure can be crucial when explaining recipients' use of companies to influence donors to give aid unconditionally, and offer a time-consistent explanation for the failure of conditionality.

Suggested Citation

  • Espen Villanger, 2003. "Company influence on foreign aid disbursement: Is conditionality credible when donors have mixed motives?," CMI Working Papers WP 2003:4, CMI (Chr. Michelsen Institute), Bergen, Norway.
    • Handle: RePEc:chm:wpaper:wp2003-4
    as

    Download full text from publisher

    File URL: https://www.cmi.no/publications/file/1555-company-influence-on-foreign-aid-disbursement.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jan Isaksen, 2002. "Energy cooperation in Southern Africa: What role for Norway?," CMI Working Papers WP 2002:4, CMI (Chr. Michelsen Institute), Bergen, Norway.
    2. repec:bla:scandj:v:98:y:1996:i:3:p:423-38 is not listed on IDEAS
    3. Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398, April.
    4. Summers, Lawrence H & Pritchett, Lant H, 1993. "The Structural-Adjustment Debate," American Economic Review, American Economic Association, vol. 83(2), pages 383-389, May.
    5. Ivar Kolstad, 2003. "The evolution of social norms," CMI Working Papers WP 2003:1, CMI (Chr. Michelsen Institute), Bergen, Norway.
    6. Dollar, David & Svensson, Jakob, 2000. "What Explains the Success or Failure of Structural Adjustment Programmes?," Economic Journal, Royal Economic Society, vol. 110(466), pages 894-917, October.
    7. Alesina, Alberto & Dollar, David, 2000. "Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
    8. Jakob Svensson, 2000. "Foreign aid and rent-seeking," Springer Books, in: Roger D. Congleton & Kai A. Konrad & Arye L. Hillman (ed.), 40 Years of Research on Rent Seeking 2, pages 165-189, Springer.
    9. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-396, March.
    10. Svensson, Jakob, 2000. "When is foreign aid policy credible? Aid dependence and conditionality," Journal of Development Economics, Elsevier, vol. 61(1), pages 61-84, February.
    11. Hatlebakk, Magnus, 2002. "A new and robust subgame perfect equilibrium in a model of triadic power relations," Journal of Development Economics, Elsevier, vol. 68(1), pages 225-232, June.
    12. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
    13. Odd-Helge Fjeldstad, 2002. "Fighting fiscal corruption: The case of the Tanzania Revenue Authority," CMI Working Papers WP 2002:3, CMI (Chr. Michelsen Institute), Bergen, Norway.
    14. C-J. Dalgaard & H. Hansen, 2001. "On Aid, Growth and Good Policies," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 17-41.
    15. Odd-Helge Fjeldstad, 2002. "The fight against corruption and the role of parliamentarians," CMI Working Papers WP 2002:6, CMI (Chr. Michelsen Institute), Bergen, Norway.
    16. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    17. Basu, Kaushik, 1986. "One Kind of Power," Oxford Economic Papers, Oxford University Press, vol. 38(2), pages 259-282, July.
    18. Trumbull, William N & Wall, Howard J, 1994. "Estimating Aid-Allocation Criteria with Panel Data," Economic Journal, Royal Economic Society, vol. 104(425), pages 876-882, July.
    19. Ussif Rashid Sumaila & Joseph Apaloo, 2002. "A selected survey of traditional and evolutionary game theory," CMI Working Papers WP 2002:7, CMI (Chr. Michelsen Institute), Bergen, Norway.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Odd-Helge Fjeldstad & Florida Henjewele & Geoffrey Mwambe & Erasto Ngalewa & Knut Nygaard, 2004. "Local government finances and financial management in Tanzania," CMI Working Papers WP 2004: 7, CMI (Chr. Michelsen Institute), Bergen, Norway.
    2. Ruxanda Berlinschi, 2010. "Reputation concerns in aid conditionality," The Review of International Organizations, Springer, vol. 5(4), pages 433-459, December.
    3. Pincin, Jared, 2013. "Political power and aid tying practices in the development assistance committee countries," MPRA Paper 49806, University Library of Munich, Germany.
    4. Odd-Helge Fjeldstad, 2003. "What has trust got to do with it? Non-payment of service charges in local authorities in South Africa," CMI Working Papers WP 2003:12, CMI (Chr. Michelsen Institute), Bergen, Norway.
    5. Kilby, Christopher, 2005. "World Bank lending and regulation," Economic Systems, Elsevier, vol. 29(4), pages 384-407, December.
    6. Pincin, Jared, 2012. "Political power and aid tying practices in the development assistance committee countries," MPRA Paper 39463, University Library of Munich, Germany.
    7. Espen Villanger, 2003. "Company interests and foreign aid policy: Playing donors out against each other," CMI Working Papers WP 2003:5, CMI (Chr. Michelsen Institute), Bergen, Norway.
    8. Espen Villanger, 2004. "Powerful donors and foreign policy: The role of multilateral financial institutions," CMI Working Papers WP 2004: 12, CMI (Chr. Michelsen Institute), Bergen, Norway.
    9. Basu, Kaushik, 2014. "Fiscal policy as an instrument of investment and growth," Policy Research Working Paper Series 6850, The World Bank.
    10. George Mavrotas & Espen Villanger, 2006. "Multilateral Aid Agencies and Strategic Donor Behaviour," WIDER Working Paper Series DP2006-02, World Institute for Development Economic Research (UNU-WIDER).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Espen Villanger, 2003. "Company interests and foreign aid policy: Playing donors out against each other," CMI Working Papers WP 2003:5, CMI (Chr. Michelsen Institute), Bergen, Norway.
    2. Espen Villanger, 2004. "Company Influence on Foreign Aid Disbursement: Is Conditionality Credible when Donors Have Mixed Motives?," Southern Economic Journal, John Wiley & Sons, vol. 71(2), pages 334-351, October.
    3. Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4415-4523, Elsevier.
    4. Almuth Scholl, 2009. "Aid Effectiveness and Limited Enforceable Conditionality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(2), pages 377-391, April.
    5. repec:hum:wpaper:sfb649dp2005-054 is not listed on IDEAS
    6. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2004. "On The Empirics of Foreign Aid and Growth," Economic Journal, Royal Economic Society, vol. 114(496), pages 191-216, June.
    7. Kilby, Christopher, 2005. "World Bank lending and regulation," Economic Systems, Elsevier, vol. 29(4), pages 384-407, December.
    8. Mark McGillivray, 2003. "Efficacité de l'aide et sélectivité : vers un concept élargi," Revue d’économie du développement, De Boeck Université, vol. 11(4), pages 43-62.
    9. Almuth Scholl, 2018. "Debt Relief for Poor Countries: Conditionality and Effectiveness," Economica, London School of Economics and Political Science, vol. 85(339), pages 626-648, July.
    10. Roland Hodler & David S. Knight, 2012. "Ethnic Fractionalisation and Aid Effectiveness," Journal of African Economies, Centre for the Study of African Economies, vol. 21(1), pages 65-93, January.
    11. Mina Baliamoune-Lutz, 2012. "Do Institutions And Social Cohesion Enhance The Effectiveness Of Aid? New Evidence From Africa," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1-19.
    12. Carl-Johan Dalgaard & Ola Olsson, 0. "Windfall Gains, Political Economy and Economic Development," Journal of African Economies, Centre for the Study of African Economies, vol. 17(suppl_1), pages -109.
    13. Mark McGillivray, 2003. "Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations," WIDER Working Paper Series DP2003-71, World Institute for Development Economic Research (UNU-WIDER).
    14. Kilby, Christopher, 2005. "Aid and regulation," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(2-3), pages 325-345, May.
    15. Tierney, Michael J. & Nielson, Daniel L. & Hawkins, Darren G. & Roberts, J. Timmons & Findley, Michael G. & Powers, Ryan M. & Parks, Bradley & Wilson, Sven E. & Hicks, Robert L., 2011. "More Dollars than Sense: Refining Our Knowledge of Development Finance Using AidData," World Development, Elsevier, vol. 39(11), pages 1891-1906.
    16. Mark McGillivray, 2005. "What determines African bilateral aid receipts?," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(8), pages 1003-1018.
    17. Philipp Harms & Matthias Lutz, 2004. "The Macroeconomic Effects of Foreign Aid: A Survey," University of St. Gallen Department of Economics working paper series 2004 2004-11, Department of Economics, University of St. Gallen.
    18. Monica Beuran & Gaël Raballand & Julio Revilla, 2011. "Improving Aid Effectiveness in Aid-Dependent Countries: Lessons from Zambia," Documents de travail du Centre d'Economie de la Sorbonne 11040, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    19. Balázs Szent-Iványi, 2015. "Are Democratising Countries Rewarded with Higher Levels of Foreign Aid?," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 65(4), pages 593-615, December.
    20. Dollar, David & Levin, Victoria, 2006. "The Increasing Selectivity of Foreign Aid, 1984-2003," World Development, Elsevier, vol. 34(12), pages 2034-2046, December.
    21. Stephen Knowles, 2007. "Social capital, egalitarianism and foreign aid allocations," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(3), pages 299-314.

    More about this item

    Keywords

    Triadic Foreign aid Credibility Fungibility Samaritan's dilemma;

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F35 - International Economics - - International Finance - - - Foreign Aid

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:chm:wpaper:wp2003-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Robert Sjursen (email available below). General contact details of provider: https://edirc.repec.org/data/cmiiino.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.