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Donor Competition for Aid Impact, and Aid Fragmentation (Inglês)

We show that donors that maximize relative aid impact spread their budgets across many recipient countries in a unique Nash equilibrium. This aid fragmentation result is robust to the introduction of fixed costs, even if they are improbably large. In equilibrium, smaller donors have less fragmented aid, and behave better from an efficiency viewpoint. We present evidence that our theoretical results are in line with cross-country correlations. Our analysis has important policy implications: First, short of ending donors’ maximization of relative aid impact, agreements to better coordinate aid allocations are not implementable. Second, since policies to increase donor competition in terms of aid effectiveness risk reinforcing relativeness, they may well backfire, as any such reinforcement increases aid fragmentation.


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    Annen,Kurt, Moers,Lucas A.M.

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    Donor Competition for Aid Impact, and Aid Fragmentation

  • Palavras-chave

    recipient countries; terms of aid; aid allocation; difference in outcomes; division of labour; good policy environment; effectiveness of aid; division of labor; impact of aid; internationally agreed standard; median income level; aid effectiveness; aid budget; donor coordination; net impact; net aid; standard error; aid recipient; gross aid; literature review; panel regression; donor aid; empirical evidence; budget constraint; optimization problem; equilibrium allocation; aid agency; equilibrium outcome; marginal impact; previous subsection; positive relationship; humanitarian aid; cross-country correlation; horizontal axis; bilateral aid; transaction cost; bureaucratic quality; negative coefficient; finance literature; positive impact; peer pressure; empirical result; empirical analysis; social emergency; multilateral agency; donor behavior; multilateral institution; conditional aid; gross loans; food aid; external aid; burden sharing; descriptive statistic; development cooperation; administrative burden; concave function; measure aid; empirical section; executive board; operational decisions; regressions gives; small fraction; global budget; point estimate; quality assessment; cross-section regression; fixed effect; Learning and Innovation Credit; unintended consequence; measurable results; competitive force; feedback mechanism; donor conditionality; donor community; empirical literature; Trade Policies; subsequent research; diminishing return; absorptive capacity; study including; regression analysis; negative sign; Trade Policy; public good; aid evaluation; multiple equilibria; selection device; international donor; strategic complementarity; administrative cost; budget share; debt forgiveness; benchmarking country; aid disbursement; resident representative; public perception; policy perspective; perverse effects; donor activities; multilateral donor; important policy; present evidence; allocation decision; aid money



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