Aid conditionality and military expenditure reduction in developing countries: models of asymmetric information.
A study was conducted to examine problems of implementing noneconomic conditionality, such as military expenditure reduction, in the granting of foreign aid in the presence of asymmetric information. Two conceptually separate principal-agent models are presented in order to capture the stylized fact...
| Published in: | Economic Journal Vol. 105; pp. 498 - 510 |
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| Main Authors: | , |
| Format: | Article |
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Wiley-Blackwell
March 1995
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| Online Access: | View this record in EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=ssf&AN=512590057&site=ehost-live header: @attributes: shortDbName: ssf uiTerm: 512590057 longDbName: Social Sciences Full Text (H.W. Wilson) uiTag: AN controlInfo: bkinfo: jinfo: jid: 00130133 EJN jtl: Economic Journal issn: 00130133 maglogo: N pubinfo: dt: March 1995 vid: 105 pid: 480 pub: Wiley-Blackwell artinfo: ui: 512590057 10.2307/2235507 ppf: 498 ppct: 12 formats: tig: atl: Aid conditionality and military expenditure reduction in developing countries: models of asymmetric information. aug: au: Murshed, S. Mansoob Sen, Somnath su: Moral hazard Agency theory Mathematical models International economic assistance Resource allocation -- Mathematical models International economic assistance -- Developing countries Military budgets Developing countries Information theory in economics Adverse selection (Insurance) sug: subj: Moral hazard Agency theory Mathematical models International economic assistance Resource allocation -- Mathematical models International economic assistance -- Developing countries Military budgets Developing countries Information theory in economics Adverse selection (Insurance) keyword: Military finance -- Developing countries ab: A study was conducted to examine problems of implementing noneconomic conditionality, such as military expenditure reduction, in the granting of foreign aid in the presence of asymmetric information. Two conceptually separate principal-agent models are presented in order to capture the stylized facts of multilateral and bilateral aid negotiations: The first model is an application of the problem of adverse selection when there is more than one type of donor with varying objectives; the second extends moral hazard to double moral hazard, where neither the donor nor recipient can fully observe or verify each other's strategies. In multilateral aid negotiations, it is demonstrated that donors benefit from pooling their offers and that this does not make individual recipients worse off. In bilateral cases, it is revealed that double moral hazard introduces suboptimal levels of action and effort by donors and recipients and that donors can actually shift the burden of action to the latter group. pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: N holdings: @attributes: islocal: N |
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