Aid Conditionality and Military Expenditure Reduction in Developing Countries

Models of Asymmetric Information

Bibliographic Data

ID9713824
AuthorsSyed Mansoob Murshed (0000-0002-8360-033X, University of Bradford), Somnath Sen (University of Birmingham)
Year1995
Volume105
Issue429
Pages498
Publication date1995-03-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.2307/2235507
OpenAlexW2089869617
LanguageEN
Citations received9

The paper analyses problems of implementing non-economic conditionality, such as military expenditure reduction, in the granting of foreign aid given the presence of asymmetric information. We present two conceptually separate principal-agent models, to capture the stylised facts of multilateral and bilateral aid negotiations respectively. The first model is an application of the problem of adverse selection when there is more than one type of principal (donor) with varying objectives. The second model extends moral hazard to double moral hazard, where neither principal nor agent (recipient) can fully observe or verify each other's strategies

Adverse selection · Computer security · Conditionality · Economics · Incentive · Information asymmetry · Microeconomics · Moral hazard · Negotiation · Political science · Principal (computer security · Reduction (mathematics · Computer Science · Economic Policies and Impacts · Game Theory and Applications · International Development and Aid · Law · Mathematics

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