Anti-Corruption and Humanitarian Aid Management in Ukraine

Abstract

Problem Definition: The flow of humanitarian aid, both monetary and in-kind, as a response to the Russian Federation’s full-scale invasion of Ukraine was unprecedented. In this context, one of the most pressing issues is how to regulate the delivery of humanitarian aid to the final beneficiaries, preventing its loss and misuse due to corrupt behavior in the delivery process. However, strengthening anti-corruption efforts is costly. This cost is part of the total financial aid and it therefore comes at the expenses of people in need. In this paper, we analyze this tradeoff and provide managerial insights in the context of humanitarian aid management in Ukraine. Methodology/results: We use game theory to model the interaction between a government agency and many distribution managers. The government agency decides the inspection intensity, and subsequently the distribution managers decide how much of humanitarian goods to misappropriate. Spending more on inspection implies less money for the government to purchase goods for the people in need. We find the optimal amount of inspection intensity by trading off the benefits against the costs. Managerial implications: Hiring a small number of inspectors may actually reduce the total amount of humanitarian aid received by the beneficiaries. This is because with a low inspection intensity, the corruption is not effectively deterred while the cost of inspection consumes part of the budget. The inspection intensity needs to reach a certain level before showing the benefit in terms of maximizing the amount of humanitarian aids delivered to the beneficiaries.

Keywords: Anti-Corruption, Humanitarian Aid, Game Theory

JEL Classification: D02, D73, F35, H12, H84, H56, C72