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Title:On the non-contractual nature of donor-recipient interaction in development assistance PDF Logo
Authors:Murshed, S. Mansoob
Issue Date:2008
Series/Report no.:Research paper / UNU-WIDER 2008.71
Abstract:This paper analyses three issues in strategic donor-recipient interaction motivated by the complexity of the rationale underlying aid. The first is when we have several principals with conflicting objectives. Any one principal cannot offer high powered incentives to the agent to carry out their designated task. The second is to do with the fact that effort associated with ensuring aid effectiveness may concern both principal and agent; the optimal solution to which requires difficult to design cooperative behaviour. Consequently, the contractual type principal-agent relationship between donors and recipients is inappropriate. We need to consider models that signal recipient quality or commitment to reform. A simple model of signalling with commitment problems is presented, along with extensions to multiple types of agents and time periods, as well as possible solutions involving mechanism design.
Subjects:aid
conditionality
contracting
signalling quality
mechanism design
JEL:D72
D82
F35
ISBN:978-92-9230-125-5
Document Type:Working Paper
Appears in Collections:WIDER Research Papers, United Nations University (UNU)

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