Information Transmission and Ownership Consolidation in Aid Programs

37 Pages Posted: 1 Nov 2013

See all articles by Axel Dreher

Axel Dreher

Heidelberg University

Silvia Marchesi

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS); University of Milan - Centro Studi Luca d'Agliano (LdA) ; Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

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Date Written: October 31, 2013

Abstract

This paper explores the role of information transmission in explaining donors’ choice between project aid and budget support. Budget support increases the involvement of recipient governments in the decision-making process and can thus be an example of a “delegation-scheme.” Conversely, project aid represents a more “centralized” type of aid. According to the theory, when countries’ local knowledge is more important than donors’ information, recipient countries’ discretion in the choice of policies should be increased (delegation). Conversely, there should be less freedom in designing policies when donors’ information is more relevant (centralization). The empirical analysis confirms that the importance of donors’ private information influences the amount of project aid, while recipients’ local knowledge is positively correlated with the amount of budget support.

Keywords: delegation, communication, ownership, foreign aid

JEL Classification: C230, D820, F330, O100

Suggested Citation

Dreher, Axel and Marchesi, Silvia, Information Transmission and Ownership Consolidation in Aid Programs (October 31, 2013). CESifo Working Paper Series No. 4437, Available at SSRN: https://ssrn.com/abstract=2348031

Axel Dreher (Contact Author)

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

HOME PAGE: http://www.axel-dreher.de

Silvia Marchesi

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy
+39 02 64483057 (Phone)

HOME PAGE: http://https://sites.google.com/site/ssilviamarchesi/home

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy

University of Milan - Centro Studi Luca d'Agliano (LdA)

Via P. Amedeo 34
Milano, Mi 20122
Italy

Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

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