Shortcuts and Signals: An Analysis of the Micro-level Determinants of Aid Allocation, with Case Study Evidence from Brazil

Does the distribution of foreign development assistance depend on the organizational capacity of the recipient organization? I argue that employees at donor agencies seek signals of which recipients will implement aid most effectively, and use these signals to determine the destination of foreign ai...

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Published inReview of development economics Vol. 10; no. 2; pp. 297 - 312
Main Author Reinhardt, Gina Yannitell
Format Journal Article
LanguageEnglish
Published Oxford, UK Blackwell Publishing Ltd 01.05.2006
Subjects
Development economics
Economic aid
Economic development
Economic theory
Foreign aid
Signaling
Studies
Brazil
United States > US
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Summary:Does the distribution of foreign development assistance depend on the organizational capacity of the recipient organization? I argue that employees at donor agencies seek signals of which recipients will implement aid most effectively, and use these signals to determine the destination of foreign aid on the micro level. Qualitative evidence gathered in the US and Brazil indicates the types of signals donors seek and recipients strive to transmit: signals of a recipient's professionalism, reputation, and sustainability. After developing a signaling game to derive the conditions under which these signals might be credible indicators of implementation effectiveness, I present quantitative evidence of aid recipient organizations in Brazil and score them on the three signals. Statistical tests confirm that organizations with higher levels of these signals are more likely to receive funding, suggesting that donors use these signals to determine the destination of development assistance.
Bibliography:ArticleID:RODE319
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Reinhardt: Texas A&M University, 4220 TAMU, College Station, TX 77843‐4220. Tel: 979/776‐5051; Fax: 979/845‐4155; E‐mail
I wish to thank Gary Miller, Andrew Sobel, Randall Calvert, the Center for New Institutional Social Sciences, and the American Association of University Women, for providing intellectual and institutional support for this research. Thank you to the organizations and respondents that took part in this study, and to Will.
greinhardt@bushschool.tamu.edu
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ISSN:1363-6669
1467-9361
DOI:10.1111/j.1467-9361.2006.00319.x