Re-conceptualizing the international aid structure: recipient donor interactions and the rudiments of a feedback mechanism

Abstract

International aid has traditionally been understood with the perspective of the donor as the main active determinant of aid flow. The recipient is often considered a passive, if not stagnant actor in the allocation of aid. New literature has begun to consider that recipient countries are not at all as passive as they may seem. They are rational actors seeking to utilize funds from international aid to maximize their welfare in the face of budgetary constraints. Their behavior changes constantly in response to incentives presented by interactions with donor behavior in the international aid structure. The complex series of interactions between donors and recipients not only have an impact on the immediate effectiveness of aid, but fundamentally re-conceptualize how the structure for international aid has traditionally been understood. Recipients' behavior has both a direct effect on the impact of aid, as well as an indirect effect on donors who seek to use their aid to fulfill a specific agenda. Similarly to recipients, donors respond to incentives and change their behaviors in order to meet their goals. This situation allows for a series of interaction between donors and recipients which has traditionally not been taken into account. I argue that these previously overlooked interactions may reflect the presence of the rudiments of a feedback mechanism through which recipients provide a series of indirect signals which donors inadvertently receive when monitoring the impact of their aid. Unfortunately this mechanism is incomplete and often goes unnoticed or, even worse, is misinterpreted by donors who do not account for incentives faced by recipients when monitoring aid effectiveness or the impact of their own behavior on these incentives.