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Title:Strategic interaction and donor policy determination in a domestic setting PDF Logo
Authors:Murshed, S. Mansoob
Issue Date:2002
Series/Report no.:WIDER Discussion Papers // World Institute for Development Economics (UNU-WIDER) 2002/107
Abstract:This paper examines some of the issues associated with the aid donor process arising from the theory of agency or principal-agent models and endogenous policy determination. The principals may be viewed as legislators and the agents as the aid agency. In addition to adverse selection and moral hazard the paper considers intrinsic sources of motivation for agents and the trade-off between adverse selection and moral hazard. It also considers multiple task agents, and where there are many principals with divergent objectives. The principals might be better off by making the tasks more complementary and trading in their differing objectives. The paper also considers the formation of aid policy via median voter outcomes, lobbying with contributions and also in the presence of altruism. Finally, problems associated with signalling commitment to optimal policies are considered.
Subjects:aid effectiveness
political processes
endogenous policy formation
JEL:H60
O11
O12
O19
ISBN:9291903418
Document Type:Working Paper
Appears in Collections:WIDER Discussion Papers, United Nations University (UNU)

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