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dc.contributor.authorIsopi, Alessiaen_US
dc.contributor.authorMattesini, Fabrizioen_US
dc.description.abstractWe propose a repeated moral hazard model with full commitment and limited punishment to study the problem of aid allocation in environments characterized by asymmetric information. The donor (principal) finances a three-period development program and the elite of the recipient country (agent), involved in the realization of the project, can affect the final output through adequate policies. The donor has the goal to help the poor of the recipient country, but she may also be conditioned by non altruistic motives. We show that when the moral hazard problem is relevant, under a wide set of parameter values, optimal aid contracts should be conditional on the previous result of the project. We distinguish between weak conditionality, which means that aid depends only on the previous performance of the project and strong conditionality, which means that aid depends on the whole history of the project. Unconditional aid may be an optimal contractual arrangement for the donor if the moral hazard issue is not very important or if the donor gives aid merely for strategic or economic reasons. An entirely altruistic donor will never provide unconditional aid. On the other hand, if she has a strong desire to help the recipient she should never deny aid to it.en_US
dc.publisherCentre for Research in Economic Development and International Trade, Univ. of Nottingham Nottinghamen_US
dc.relation.ispartofseriesCREDIT Research Paper 09/10en_US
dc.subject.keywordForeign Aiden_US
dc.subject.keywordMoral Hazarden_US
dc.subject.stwAsymmetrische Informationen_US
dc.subject.stwMoral Hazarden_US
dc.titleGood donors or good recipients? A repeated moral hazard model of aid allocationen_US
dc.typeWorking Paperen_US
Appears in Collections:CREDIT Research Papers, The University of Nottingham

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