The Institutional Economics of Foreign Aid

Book excerpt: This book is about the institutions, incentives and constraints that guide the behaviour of people and organizations involved in the implementation of foreign aid programmes. While traditional performance studies tend to focus almost exclusively on the policies and institutions in recipient countries, this book looks at incentives in the entire chain of organizations involved in the delivery of foreign aid, from donor governments and agencies to consultants, experts and other intermediaries. Four aspects of foreign aid delivery are examined in detail: incentives inside donor agencies, the interaction of subcontractors with recipient organizations, incentives inside recipient country institutions, and biases in aid performance monitoring systems.