Coordination Failure in Foreign Aid
The author analyzes the allocation of foreign aid to various sectors in a recipient developing country. Donors tend to favor social sectors over other public expenditure programs. Due to incomplete information, donors may concentrate too much on pr...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2004/02/3585322/coordination-failure-foreign-aid http://hdl.handle.net/10986/14305 |
| Summary: | The author analyzes the allocation of
foreign aid to various sectors in a recipient developing
country. Donors tend to favor social sectors over other
public expenditure programs. Due to incomplete information,
donors may concentrate too much on priority sectors, leaving
lower-priority yet important sectors lacking funds.
Alternatively there may be gaps in services in priority
areas because of the information problem. The author finds
that the more similar preferences the donors have, the more
scope there is for coordination failure. Therefore improving
information is particularly important when the parties have
similar priorities. A joint database on planned projects and
budget allocations in each recipient country would provide
such information. The author's point is that such
databases should have both information on current projects
and forward-looking information on the planned activities
needed to improve aid coordination. She also analyzes the
aid fungibility problem in an incomplete information setting
and finds that incomplete information reduces the
fungibility problem. On the other hand, incomplete
information introduces coordination failure and the
allocation can be inferior for both the recipient and the donor. |
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