Aid Effectiveness, elite capture and decentralized development

The question of aid effectiveness is addressed with the specific concern of elite capture in mind. So-called 'development brokers' inevitably act as intermediaries between providers of aid money and targeted beneficiaries. Owing to asymmetrical information, the intermediary, whether the local elite in a community-driven or participatory development programme or a national government, has the ability to embezzle part of the aid received from the donor. Using a principal-agent framework, this problem is modelled in two different settings. In the first setting, the intermediary is a village elite who is the agent of the donor for the disbursement of aid money and simultaneously plays a bargaining game with the beneficiaries, the village grassroots. In the second setting, the agent is a national government that receives funds from the international community. In both cases, there is a monitoring technology and a punishment mechanism available to discipline the intermediary. Special focus is on the nature of the factors determining the proportion (or the absolute amount) of the aid funds that reaches the beneficiaries, including the extent of donor competition, the amount of aid money available, the effectiveness of the monitoring technology available, the elite's degree of accountability to the beneficiaries, etc..


Persons currently involved

Jean-Philippe Platteau, Vincent Somville, Frédéric Gaspart (University of Louvain), François Bourguignon (Paris delta), Jamele Rigolini (World Bank).