Donor strategy under the fungibility of foreign aid
Lahiri, S. & Raimondos-Møller, Pascalis (2004) Donor strategy under the fungibility of foreign aid. Economics and Politics, 16(2), pp. 213-231.
We develop a political–economic model of aid fungibility: a part of aid is diverted away from its intended target by lobby groups. The size of this diversion – the degree of aid fungibility – is determined endogenously by the recipient government. The donor can affect the equilibrium degree of fungibility by choosing both the size of aid and the timing of its decision. We derive a condition under which the donor's reaction to fungibility is to reduce the amount of aid. Under this condition, if the donor acts as a follower, both the donor and the target group are better off.
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|Item Type:||Journal Article|
|Copyright Owner:||Copyright 2004 Wiley-Blackwell Publishing Ltd|
|Deposited On:||22 Mar 2016 04:38|
|Last Modified:||22 Mar 2016 04:39|
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