Title
Aid tying and donor fragmentation
Author
Faculty/Department
Institute of Development Policy and Management
Publication type
article
Publication
Oxford ,
Subject
Economics
Law
Source (journal)
World development. - Oxford
Volume/pages
44(2013) , p. 63-76
ISSN
0305-750X
ISI
000317149000005
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
This study analyzes theoretically and empirically the impact of aid fragmentation on donors' decisions to tie their development aid to purchases from contractors based in their own countries. Building on collective action theory, it argues that a donor with a larger share of the aid market in a country has stronger incentives to maximize the development impact of its aid, by tying less of it. Empirical tests strongly and consistently support the prediction that higher donor aid shares will be associated with less aid tying. This finding is robust to recipient controls, donor fixed effects, and instrumental variables estimation. Furthermore, it contradicts other studies suggesting that when a small number of donors dominate the aid market in a country, they may exploit their monopoly power by tying more of their aid. (C) 2012 Published by Elsevier Ltd.
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