Donor Competition for Aid Impact, and Aid Fragmentation

We show that donors that maximize relative aid impact spread their budgets across many recipient countries in a unique Nash equilibrium. This aid fragmentation result is robust to the introduction of fixed costs, even if they are improbably large. In equilibrium, smaller donors have less fragmented...

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Main Authors:	Annen, Kurt, Moers, Luc
Format:	Journal Article
Published:	Published by Oxford University Press on behalf of the World Bank 2019
Subjects:	FOREIGN AID DONORS INTERNATIONAL ORGANIZATION FINANCIAL INSTITUTIONS AID FRAGMENTATION
Online Access:	http://hdl.handle.net/10986/31474

id	okr-10986-31474
recordtype	oai_dc
spelling	okr-10986-314742021-05-25T10:54:37Z Donor Competition for Aid Impact, and Aid Fragmentation Annen, Kurt Moers, Luc FOREIGN AID DONORS INTERNATIONAL ORGANIZATION FINANCIAL INSTITUTIONS AID FRAGMENTATION We show that donors that maximize relative aid impact spread their budgets across many recipient countries in a unique Nash equilibrium. This aid fragmentation result is robust to the introduction of fixed costs, even if they are improbably large. In equilibrium, smaller donors have less fragmented aid, and behave better from an efficiency viewpoint. We present evidence that our theoretical results are in line with cross-country correlations. Our analysis has important policy implications: First, short of ending donors' maximization of relative aid impact, agreements to better coordinate aid allocations are not implementable. Second, since policies to increase donor competition in terms of aid effectiveness risk reinforcing relativeness, they may well backfire, as any such reinforcement increases aid fragmentation. 2019-04-01T18:36:27Z 2019-04-01T18:36:27Z 2017-10-01 Journal Article World Bank Economic Review 1564-698X http://hdl.handle.net/10986/31474 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Published by Oxford University Press on behalf of the World Bank Publications & Research :: Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
topic	FOREIGN AID DONORS INTERNATIONAL ORGANIZATION FINANCIAL INSTITUTIONS AID FRAGMENTATION
spellingShingle	FOREIGN AID DONORS INTERNATIONAL ORGANIZATION FINANCIAL INSTITUTIONS AID FRAGMENTATION Annen, Kurt Moers, Luc Donor Competition for Aid Impact, and Aid Fragmentation
description	We show that donors that maximize relative aid impact spread their budgets across many recipient countries in a unique Nash equilibrium. This aid fragmentation result is robust to the introduction of fixed costs, even if they are improbably large. In equilibrium, smaller donors have less fragmented aid, and behave better from an efficiency viewpoint. We present evidence that our theoretical results are in line with cross-country correlations. Our analysis has important policy implications: First, short of ending donors' maximization of relative aid impact, agreements to better coordinate aid allocations are not implementable. Second, since policies to increase donor competition in terms of aid effectiveness risk reinforcing relativeness, they may well backfire, as any such reinforcement increases aid fragmentation.
format	Journal Article
author	Annen, Kurt Moers, Luc
author_facet	Annen, Kurt Moers, Luc
author_sort	Annen, Kurt
title	Donor Competition for Aid Impact, and Aid Fragmentation
title_short	Donor Competition for Aid Impact, and Aid Fragmentation
title_full	Donor Competition for Aid Impact, and Aid Fragmentation
title_fullStr	Donor Competition for Aid Impact, and Aid Fragmentation
title_full_unstemmed	Donor Competition for Aid Impact, and Aid Fragmentation
title_sort	donor competition for aid impact, and aid fragmentation
publisher	Published by Oxford University Press on behalf of the World Bank
publishDate	2019
url	http://hdl.handle.net/10986/31474
_version_	1764474409903456256

Donor Competition for Aid Impact, and Aid Fragmentation

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