Compete or Coordinate? Aid Fragmentation and Lead Donorship

Abstract

AbstractDonor proliferation and the fragmentation of aid delivery is an important problem besetting foreign aid policy. Increased donor coordination is widely seen as a fix to this problem. This article explores theoretically and empirically the collective action problems and incentives that donors face when coordinating their actions, based on the distinction between private and public goods properties of aid. I introduce the concept of lead donorship, develop a measure that accounts for the exclusive and long-lasting ties between a lead donor and a recipient country, and show that lead donorship is in long-term decline. I test my theory combining spatial autoregressive (SAR) models, nonparametric model discrimination techniques, and data on aid delivery channels. I recover evidence of collusion in the provision of private goods aid in the presence of a lead donor, and lack of coordination and competition in the absence of a lead donor.