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

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  • 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
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    Cited by:

    1. Ruxanda Berlinschi, 2010. "Reputation concerns in aid conditionality," The Review of International Organizations, Springer, vol. 5(4), pages 433-459, December.
    2. Pincin, Jared, 2013. "Political power and aid tying practices in the development assistance committee countries," MPRA Paper 49806, University Library of Munich, Germany.
    3. Kilby, Christopher, 2005. "World Bank lending and regulation," Economic Systems, Elsevier, vol. 29(4), pages 384-407, December.
    4. Pincin, Jared, 2012. "Political power and aid tying practices in the development assistance committee countries," MPRA Paper 39463, University Library of Munich, Germany.
    5. Basu, Kaushik, 2014. "Fiscal policy as an instrument of investment and growth," Policy Research Working Paper Series 6850, The World Bank.
    6. 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).

    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

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