Aid Effectiveness: A comparison of Tied and Untied Aid

We evaluate the differential effects of Tied and Untied aid on growth, and how these effects vary with the policy environment of the recipient country. To do so, we use Burnside and Dollar (2000) and Easterly, Levine and Roodman (2003) datasets. We find that aid effectiveness is not significantly different for the two types of aid. However, when we condition on policies, we find that untied aid has a greater impact on growth than tied aid. We find that this difference is significant for the sample of low and middle-income countries, and is not statistically significant, but consistent in sign for the sub sample of low-income countries.Foreign Aid, Aid Contracts, Tied and Untied Aid

Financing Multi-stage projects under moral hazard and limited commitment

We present the optimal contract for financing a project that has N stages to be completed sequentially when the principal can not commit to abandone the project before it is completed and the project to be completed is valued by the agent. In a dynamic moral hazard setting, we find that the optimal contract provides decreasing transfers for successive unsuccessful attempts in a given stage, and smaller transfers when the subsequent stages are reached. We find that the optimal sequence of transfers is greater the bigger is the exogenous probability of returning to a preceding stage and the greater the principal’s cost of stage verification is. When intermediate stages are valued by the agent, we find that smaller transfers are optimal.Dynamic contracts, Moral Hazard, Foreign Aid, multi-stage projects

Optimal Incentives in Dynamic Multiple Project Contracts

We design a multiple project-funding contract that provides optimal incentives to recipients, in a setting where externalities exist among the multiple projects and where donors and recipients may differ in their valuation of the projects. To do so, we study optimal incentive payments in a dynamic principal-agent framework with focus on two-project contracts. The principal cannot observe the agent’s investment, but only completed projects. We consider principals that cannot commit to contract termination before completion of the projects; we assume that the contract does not end until both projects are accomplished. We derive the optimal contract for each possible combination of principal-agentproject characteristics to find that projects should be undertaken simultaneously when value externalities among them are large, i.e. when completing both projects gives the recipient significantly more utility than the sum of the projects’ independent values. The principal’s utility maximizing strategy, when technical externalities among projects are important, is a sequential contract that starts with the project that generates the externality. We find that differences in project valuation between agents and recipients may, in some cases, lead to inefficient contracts, when in other situations the ability of the principal to choose the timing of the project competition may be a safety clause for him.Dynamic Contracts, Multitask, Foreign Aid

Mill Ownership and Farmer's Cooperative Behavior: The case of Costa Rica Coffee Farmers

We analyze how Costa Rican coffee farmer's behavior in an experimental public good game depends on the type of mill where the farmers sell their coffee (Cooperative vs. privately owned mills), and on the background of their game partners (partners selling to same type of mill or not). We find that cooperative farmers do not display more public good orientation than private market farmers when playing with partners from the same type of mill. However, while farmers selling to private mills make no difference with respect to the background of partners, farmers selling to cooperatives significantly decrease contributions when paired with non-cooperative members. Finally, we study how self-selection into a mechanism that punishes the lowest contributors affects contributions both inside the group and with partners of the opposite background, and show that this increases contributions in the games played with farmers selling to different mill type

Taxing Fragmented Aid to Improve Aid efficiency

We present a model with two donors-principals that provide funds to a unique recipient-agent. Each donor decides how to allocate his aid funds between a pooled and a donor specific unilateral project. Both principals and the agent value the output produced with the principals' pooled and two unilateral funded projects. However the donors have a bias in favor of their own unilateral project, which leads them to over-invest in these projects. The agent establishes a tax on the unilateral projects, which acts as a protection measure against biased allocation by the principals. The optimal tax imposed by the recipient on unilateral projects varies depending on the total amount of aid provided by the donor and on the productivity of his unilateral project. We present empirical support on the donors' preferences for unilateral projects, and how allocations and fragmentation are affected by recipient's characteristics

Mill Ownership and Farmer's Cooperative Behavior: The case of Costa Rica Coffee Farmers

We analyze how Costa Rican coffee farmer's behavior in an experimental public good game depends on the type of mill where the farmers sell their coffee (Cooperative vs. privately owned mills), and on the background of their game partners (partners selling to same type of mill or not). We find that cooperative farmers do not display more public good orientation than private market farmers when playing with partners from the same type of mill. However, while farmers selling to private mills make no difference with respect to the background of partners, farmers selling to cooperatives significantly decrease contributions when paired with non-cooperative members. Finally, we study how self-selection into a mechanism that punishes the lowest contributors affects contributions both inside the group and with partners of the opposite background, and show that this increases contributions in the games played with farmers selling to different mill type

When to Pay More: Incentives, Culture and Status in Principal‐ Agent Interactions

We study the role of status in an experimental Principal-Agent game.Status is awarded to subjects based on either talent or luck. In each randomly matched principal-agent pair, the principal chooses the agent's status-contingent piece rate for a task in which talent matters for performance (an IQ test). We perform the experiment in Cambridge (UK) and in HCMV (Vietnam). We find that in Cambridge piece rate others are significantly higher for high-status agents (only) when status signals talent. However, these higher offers are not payoff-maximizing for the principals.In contrast, Vietnam piece rate offers are significantly higher for high-status agents (only) when status is determined by luck. We explore possible explanations, and the implications for status and incentives

Taxing Fragmented Aid to Improve Aid efficiency

We present a model with two donors-principals that provide funds to a unique recipient-agent. Each donor decides how to allocate his aid funds between a pooled and a donor specific unilateral project. Both principals and the agent value the output produced with the principals' pooled and two unilateral funded projects. However the donors have a bias in favor of their own unilateral project, which leads them to over-invest in these projects. The agent establishes a tax on the unilateral projects, which acts as a protection measure against biased allocation by the principals. The optimal tax imposed by the recipient on unilateral projects varies depending on the total amount of aid provided by the donor and on the productivity of his unilateral project. We present empirical support on the donors' preferences for unilateral projects, and how allocations and fragmentation are affected by recipient's characteristics

When to Pay More: Incentives, Culture and Status in Principal‐ Agent Interactions

We study the role of status in an experimental Principal-Agent game.Status is awarded to subjects based on either talent or luck. In each randomly matched principal-agent pair, the principal chooses the agent's status-contingent piece rate for a task in which talent matters for performance (an IQ test). We perform the experiment in Cambridge (UK) and in HCMV (Vietnam). We find that in Cambridge piece rate others are significantly higher for high-status agents (only) when status signals talent. However, these higher offers are not payoff-maximizing for the principals.In contrast, Vietnam piece rate offers are significantly higher for high-status agents (only) when status is determined by luck. We explore possible explanations, and the implications for status and incentives

How forced displacement flows affect public good contributions

Low intensity armed conflict is usually related to population displacement, altering networks and social capital in affected regions. With an incentivized questionnaire performed in the Colombian coffee growing axis (Eje Cafetero), we observe contribution to an abstract and anonymous public good when contributions are not enforceable. Game contributions are significantly higher in regions with high net-changes of population due to displacement, both for regions with net in-flow and net out-flow, compared to a more stable area. We find that the effect is especially strong for women in net out-flow areas; usually the most affected if male family members are forcibly displaced. We further propose a local inspection mechanism, and show that it increases contributions in all areas independently of the displacement history of the location and the individuals preferences with respect to this mechanism