Beyond Planning: Markets and Networks for Better Aid

45 Pages Posted: 20 Oct 2009

Date Written: October 15, 2009

Abstract

The political economy of aid agencies is driven by incomplete information and multiple competing objectives and confounded by principal-agent and collective-action problems. Policies to improve aid rely too much on a planning paradigm that tries to ignore, rather than change, the political economy of aid. A considered combination of market mechanisms, networked collaboration, and collective regulation would be more likely to lead to significant improvements. A “collaborative market” for aid might include unbundling funding from aid management to create more explicit markets; better information gathered from the intended beneficiaries of aid; decentralized decision-making; a sharp increase in transparency and accountability of donor agencies; the publication of more information about results; pricing externalities; and new regulatory arrangements to make markets work. The aid system is in a political equilibrium, determined by deep characteristics of the aid relationship and the political economy of aid institutions. Reformers should seek to change that equilibrium rather than try to move away from it. The priority should be on reforms that put pressure on the aid system to evolve in the right direction rather than on grand designs.

Keywords: aid, aid reform, aid institutions, political economy, market mechanism, networks

Suggested Citation

Barder, Owen Matthew, Beyond Planning: Markets and Networks for Better Aid (October 15, 2009). Center for Global Development Working Paper No. 185, Available at SSRN: https://ssrn.com/abstract=1491103 or http://dx.doi.org/10.2139/ssrn.1491103

Owen Matthew Barder (Contact Author)

Center for Global Development ( email )

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Washington, DC 20036
United States

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