@techreport{Amegashie2007Moral,
abstract = {The paper presents a theoretical and empirical analysis of a donors choice of the composition of unrestricted and in-kind/restricted transfers to a recipient and how this composition is adjusted in response to changes in the moral hazard behavior of the recipient. In-kind or restricted transfers may be used, among others, to control a recipients moral hazard behavior but may be associated with deadweight losses. Within the context of foreign aid, we use a canonical political agency model to construct a simple signaling game between a possibly corrupt politician in a recipient country and a donor to illustrate the donors optimal choice of tied (restricted) and untied foreign aid. We clarify the condition under which a reduction in the recipients moral hazard behavior (i.e., improvement in the level of governance) leads to a fall in the proportion of tied aid. We test the predictions of our theoretical analysis using data on the composition of foreign aid by multilateral and bilateral donors.},
address = {M\"{u}nchen},
author = {J. Atsu Amegashie and Bazoumana Ouattara and Eric Strobl},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {D73; F35; H87; I38; 330; Entwicklungshilfekonditionen; Internationale Wirtschaftshilfe; Governance-Ansatz; Moral Hazard; Theorie},
language = {eng},
number = {1996},
publisher = {CESifo},
title = {Moral hazard and the composition of transfers: theory with an application to foreign aid},
type = {CESifo working paper},
url = {http://hdl.handle.net/10419/26041},
year = {2007}
}
