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The Institutional Economics of Foreign Aid
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Book description

This book is about the institutions, incentives and constraints that guide the behaviour of people and organizations involved in the implementation of foreign aid programmes. While traditional performance studies tend to focus almost exclusively on the policies and institutions in recipient countries, this book looks at incentives in the entire chain of organizations involved in the delivery of foreign aid, from donor governments and agencies to consultants, experts and other intermediaries. Four aspects of foreign aid delivery are examined in detail: incentives inside donor agencies, the interaction of subcontractors with recipient organizations, incentives inside recipient country institutions, and biases in aid performance monitoring systems.


'In sum, this book provides a thoughtful assessment of the institutional constraints to foreign aid. Graduate students and teachers, as well as development practitioners, will find much of interest in this book.'

Source: The Journal of Development Studies

‘The four authors demonstrate that agency theory can be successfully applied to shed light on the delivery of foreign aid. Practitioners are probably familiar with many of the problems highlighted but the book deserves credit for putting them on a sound theoretical footing.’

Source: Aussen-Wirtschaft

‘This excellent book makes a significant contribution to our understanding of the factors of success and failure of foreign aid … full of interesting insights into the operation of real-world aid mechanisms. The use of agency theory gives the book considerable conceptual unity and reinforces its message … this is an excellent example of applied economics at its best, using models that deal realistically with real problems to throw light upon relevant and important questions. It should interest a large number of economists and other professionals involved in or concerned with foreign aid and development cooperation. In fact, at least the opening chapter should be made compulsory reading for all such professionals, since this would be likely both to increase their effectiveness and decrease their levels of frustration. It would also not surprise me if the publication of this book would trigger a stream of related studies …’

Source: Development and Change

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