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Contents List ofBoxes xvi List ofFigures xvii List ofTables xviii List ofAcronyms and Abbreviations xix List ofContributors xxi Part I. Introduction 1. What's Wrong with Development Aid? 3 1.1. Rethinking development aid 3 1.2. Incentives, development aid, and the plan of this book 5 1.2.1. Perverse incentives in day-to-day interactions 1.2.2. Perverse incentives in the policy process 1.2.3. Perverse incentives in the development aid system 1.2.4. Perverse incentives in donor agencies 1.2.5. Cases in recipient countries 1.3. Five key concepts for the institutional analysis of development aid 7 1.3.1. Institutions (and their close cousins) 1.3.2. Incentives 1.3.3. Development, development aid, and development cooperation 1.3.4. Sustainability 1.3.5. Ownership 1.4. Promoting development 13 1.4.1. Missing money? 1.4.2. Missing institutions? 1.4.3. Collective-action situations and development 1.4.4. Ownership and collective action 1.5. Conclusion 18 Part II. Theoretical Foundations 2. Laying the Theoretical Foundations for the Study of Development Aid 23 2.1. Introduction 23 2.2. An overview of the institutional analysis and development framework 24 2.3. Doing institutional analysis 25 2.3.1. Actors and action situations 2.3.2. Explaining outcomes within an action arena 2.3.3. The concept of rules 2.3.4. Physical/material conditions 2.3.5. Attributes of a community 2.4. Motivational problems at the operational level 35 2.4.1. Public goods and free-riding 2.4.2. Common-pool resource problems 2.4.3. The Samaritan's Dilemma 2.4.4. Asymmetric power relationships 2.5. Information problems at an operational level 41 2.5.1. Missing information and local knowledge Moral hazard Principal-agent situations 2.5.2. Asymmetric information about characteristics Adverse selection Signaling problems 2.6. Solving opj120nal-level problems 46 3. Better Development Through Better Policy? Development Aid's Challenges at the Collective-Choice Level 49 3.1. Introduction 49 3.2. Changing unproductive situations at the collective-choice level 50 3.3. Missing, weak, or bad institutions 53 3.4. Motivational problems at a collective-choice level 54 3.4.1. Rules as public goods 3.4.2. Rent seeking 3.4.3. Corruption 3.5. Informational problems at a collective-choice level 56 3.5.1. Missing and asymmetric information Fiscal illusion 3.5.2. Translating preferences into outcomes-the impossibility theorem 3.6. Enter the donor 57 4. Sorting Out the Tangle: Incentives Across Action Situations in Development Aid 61 4.1. Introduction 61 4.2. The chain of aid delivery 62 4.3. The international development cooperation octangle 63 4.3.1. The full octangle 4.3.2. The donor-recipient negotiation arena Strong donor-strong recipient Strong donor-weak recipient Enlightened donor-weak recipient 4.3.3. Principal-agent arenas within donor and recipient countries Principal-agent relations-politicians and bureaucrats Principal-agent relations-owners, donor agencies, and contractors 4.3.4. Beneficiaries Links between beneficiaries and government Linking governments to citizens and interest groups 4.3.5. Competition among donors 4.4. Applying the IAD framework to analyze the donor-recipient dyad 75 4.5. Conclusion 84 5. A Formal Analysis of Incentives in Strategic Interactions Involving an International Development Cooperation Agency 87 5.1. Introduction 87 5.2. Strategic implication of altruism for results 88 5.2.1. Aid in a one-shot game: The Samaritan 5.2.2. Aid in a repeated game: The Samaritan's Dilemma 5.2.3. Principal-agent problems in one-shot games 5.2.4. Principal-agent problems in repeated games 5.3. Foreign aid as a substitute for borrowing in capital markets 95 5.3.1. Aid conditionality 5.3.2. Aid tournaments 5.4. Externalities and market failures 99 5.4.1. Public good problems 5.4.2. Common-pool resource problems 5.4.3. Corruption 5.5. Coordinated aid 108 5.6. Equity considerations 109 5.7. Warm-glow effects 110 5.8. Conclusion 111 6. All Aid is Not the Same: The Incentives of Different Types of Aid 112 6.1. Introduction 112 6.2. Aid as "carrots and sticks" 112 6.3. The configuration of aid capital 114 6.4. The characteristics of aid 115 6.4.1. Grants, credits, and guarantees Grants Credits Guarantees 6.4.2. Tied-aid-Issues and incentives 6.4.3. Aid conditionality-Ex ante versus ex post 6.5. The modalities of aid 120 6.5.1. Project aid 6.5.2. Program aid 6.5.3. Sector-wide approaches 6.5.4. Humanitarian assistance 6.5.5. Technical cooperation 6.6. Conclusion 127 Part III. Case Studies 7. Applying the IAD Framework: The Incentives Inside a Development Agency 131 7.1. Introduction 131 7.2. Methods 132 7.3. Using the IAD framework to study the organization of a development agency: Sida 133 7.3.1. Sida as an agent of the Swedish government and its people 7.3.2. Looking inside Sida 7.4. Contextual variables and their influences on action arenas 137 7.4.1. Institutional factors influencing action arenas 7.4.2. Cultural factors influencing the action arenas 7.4.3. Biophysical characteristics influencing the action arenas 7.5. Patterns of interactions: Incentives for learning about sustainable outcomes 141 7.5.1. A highly motivated staff Individual learning about sustainability Empirical evidence on the conditions for individual learning about sustainability Short-term assignments Communication after an assignment Temporary contracts Retention and recruitment of younger staff Career advancement criteria related to performance of past projects 7.6. Organizational learning through formal evaluations 150 7.7. Empirical evidence on organizational learning through evaluations 151 7.8. A formal evaluation process without much learning 153 7.9. Budgetary processes oriented toward sustainability 154 7.10. Conclusions 156 8. Incentives For Contractors in Aid-Supported Activities 160 8.1. Introduction 160 8.2. The place of contractors in aid programs 161 8.3. Incentives for contractor performance 162 8.3.1. Pre-design phase 8.3.2. Design phase 8.3.3. Implementation phase 8.4. Incentive incompatibilities: Control versus ownership 165 8.5. Contractors' incentives and the prospects for sustainability 166 8.5.1. Is a consultant-directed project likely to be sustainable? 8.5.2. What is the role of the consultant in ownership? 8.6. The Sida contractors' perceptions 167 8.6.1. "For whom do we work?" 8.6.2. Contractors' perceptions of relationship to Sida 8.6.3. What makes a consultant tick? 9. Sida Aid in Electricity and Natural Resource Projects in India 171 9.1. Using institutional analysis 171 9.2. Sweden's development cooperation with India 172 9.2.1. Changing strategic interests in bilateral development assistance 9.2.2. Aid and institutional reform in the states 9.3. Capacity building for participatory management of degraded forests in Orissa 174 9.3.1. History of the project 9.3.2. An institutional analysis of the Orissa Capacity Building Project The action arena Rules-in-use-A return to community-based forest management 9.3.3. The role of key actors The Orissa forest department The government of Orissa Sida Scandiaconsult Natura NGOs 9.3.4. Interactions within the octangle The Sida-Orissa forest department-forest communities triad The Sida-Scandiaconsult Natura-Orissa forest department triad 9.3.5. Implications for ownership and sustainability 9.4. The Chandrapur-Padghe HVDC Converter Terminal Project 184 9.4.1. History of the project 9.4.2. An institutional analysis of the Chandrapur-Padge Project The action arena Rules-in-use: Governance in the power sector A free-rider problem 9.4.3. Interactions within the octangle The recipient government-MSEB-interest group triad The donor government-Sida-special interests triad The donor-other donors-recipient triad The contractor at the center Recipient beneficiaries 9.4.4. Implications for ownership and sustainability 9.5. Conclusions 194 10. Sida Aid in Electricity and Natural Resource Projects in Zambia 198 10.1. Introduction 198 10.2. Zambia's experience with development cooperation 198 10.2.1. Sweden's role in Zambia's development 10.3. The Zambian ERB 200 10.3.1. History of the ERB project 10.3.2. An institutional analysis of the Energy Regulation Board Actors and the action situation Influences on the action arena 10.3.3. Patterns of interaction: Incentives and the ERB Incentives of government Incentives of ZESCO Incentives of the ERB Incentives for the public and interest groups Incentives for Sida 10.3.4. Outcomes: Implications for ownership and sustainability 10.4. The Kafue Gorge Hydropower Station Rehabilitation Project 207 10.4.1. Project history 10.4.2. An institutional analysis of the KRGP The action arena Influences on the action arena 10.4.3. Patterns of interaction Incentives of government Incentives of ZESCO Incentives for Sida Incentives for Swedpower 10.4.4. Outcomes: Implications for ownership and sustainability 10.5. The CFU 211 10.5.1. History of the project 10.5.2. An institutional analysis of the CFU Action arena Influences on the action arena Community attributes Institutional context and rules-in-use 10.5.3. Patterns of interaction: Incentives and the CFU project Incentives of CFU project managers Incentives for MAFF Incentives for Sida Incentives for conservation farming promoters 10.5.4. Implications for ownership and sustainability 10.6. Conclusions 219 Part IV. Conclusion 11. What Have We Learnt About Aid? 223 11.1. Awareness of the role of incentives 224 11.2. The nature of the good 225 11.3. Ownership and sustainability 226 11.4. Encouraging learning at the individual and organizational levels 229 11.5. The role of consultants 231 11.6. Putting beneficiaries first 232 Bibliography 235 Index 000
Library of Congress Subject Headings for this publication:
Economic assistance.
Economic development -- Research.
Economic development projects.
Economic assistance -- Developing countries.
Economic development -- Research -- Developing countries.
Economic development projects -- Developing countries.