Intermediation by Aid Agencies

27 Pages Posted: 8 Mar 2005

See all articles by Colin Rowat

Colin Rowat

University of Birmingham - Department of Economics

Paul Seabright

University of Toulouse I - Industrial Economic Institute (IDEI); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2004

Abstract

This Paper models aid agencies as financial intermediaries that do not make a financial return to depositors, since the depositors' concern is to transfer resources to investor-beneficiaries. This leads to a significant problem of verification of the agencies' activities. One solution to this problem is for an agency to employ altruistic workers at below-market wages: workers can monitor the agency's activity more closely than donors, and altruistic workers would not work at below-market rates unless the agency were genuinely transferring resources to beneficiaries. We consider conditions for this solution to be incentive compatible.

Keywords: Signalling, non-profit, wage differential, donations, altruism, two-sided market

JEL Classification: D21, D64, J31, L31

Suggested Citation

Rowat, Colin and Seabright, Paul, Intermediation by Aid Agencies (December 2004). CEPR Discussion Paper No. 4781. Available at SSRN: https://ssrn.com/abstract=667941

Colin Rowat

University of Birmingham - Department of Economics ( email )

Economics Department
Birmingham, B15 2TT
United Kingdom
+44 121 414 3754 (Phone)
+44 121 414 7377 (Fax)

Paul Seabright (Contact Author)

University of Toulouse I - Industrial Economic Institute (IDEI) ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France
+33 5 61 12 86 17 (Phone)
+33 5 61 12 86 37 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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