Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/34788
Authors: 
Epstein, Gil S.
Gang, Ira N.
Year of Publication: 
2008
Series/Report no.: 
IZA Discussion Papers 3585
Abstract: 
We model the aid allocation decision where the donor government has announced that good governance is the criterion for receiving aid. Potential recipients must compete for the aid funds. The structure of the competition is important to the donor in terms of achieving good governance, and to the recipients in terms of what they receive. The leaders of potential recipient countries look at aid availability through this contest as part of the competing objectives they face - some good, some not good. The donor country prefers a contest under which the aid will only go to one country while the leaders of the receiving countries prefer that each country obtains the proportion of aid relative to its governance quality. If poverty reduction is an independent goal as well, a poverty trap may be created. With good governance as a criterion, donors may work through both bilateral and multilateral agencies.
Subjects: 
Foreign aid
governance
decentralization
rent seeking
JEL: 
O10
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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