Abstract We analyze allocation of foreign aid to different sectors in a recipient developing country. Donors tend to favor social sectors over other public expenditure programs. Due to incomplete information coordination failure occurs. The donors may concentrate too much on the priority sectors...

This paper analyzes the effect of reputation on ownership of public goods in the Besley and Ghatak (2001) model. We show that in the dynamic setup the optimal ownership depends not only on the relative valuations for the public good but also on technology (elasticity of investment). We also show...

We analyze allocation of foreign aid to different sectors in a recipient developing country. Donors tend to favor social sectors over other public expenditure programs. Due to incomplete information coordination failure occurs. The donors may concentrate too much on the priority sectors leaving...