Company interests and foreign aid policy: Playing donors off against one another

The evidence on conditionality indicates that this instrument sometimes works, and sometimes does not work. We suggest that third parties to the donor–recipient relationship influence the aid disbursement. The halt in aid that should follow non-compliance could trigger the recipient to cancel contra...

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Bibliographic Details
Published in:European economic review 2006-04, Vol.50 (3), p.533-545
Main Author: Villanger, Espen
Format: Article
Language:English
Subjects:
Compliance
Conditionality
Development policy
Economic analysis
Economic equilibrium
Economic models
Foreign aid
Foreign assistance
Game theory
International economic policy
Lobbying
Strategic planning
Studies
Third party
Triadic
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Summary:The evidence on conditionality indicates that this instrument sometimes works, and sometimes does not work. We suggest that third parties to the donor–recipient relationship influence the aid disbursement. The halt in aid that should follow non-compliance could trigger the recipient to cancel contracts with companies from donor countries, which creates incentives for the companies to put pressure towards aid disbursement. We use a multi-agent triadic model of the relationships between a recipient and two donors and two companies to illustrate that recipients may act strategically to make third parties (like companies and others) influence the disbursement decision. Failing to take account of third parties’ role yields the opposite result; conditionality becomes successful.
ISSN:0014-2921
1873-572X
DOI:10.1016/j.euroecorev.2005.01.005