Premium
Foreign Aid Transaction Costs: What Are They and When Are They Minimised?
Author(s) -
Paul Elisabeth,
Vandeninden Frieda
Publication year - 2012
Publication title -
development policy review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.671
H-Index - 61
eISSN - 1467-7679
pISSN - 0950-6764
DOI - 10.1111/j.1467-7679.2012.00577.x
Subject(s) - transaction cost , database transaction , modalities , search cost , aid effectiveness , business , computer science , operations management , economics , industrial organization , risk analysis (engineering) , microeconomics , developing country , database , economic growth , social science , sociology
‘Transaction costs’ are commonly referred to in the recent literature on aid effectiveness. Aid transaction costs, however, have been neither consistently defined nor measured. This article defines aid transaction costs as all the economic costs associated with aid management that add no value to aid delivery. This enables the ‘net’ transaction costs that should be minimised to be identified. An analytical framework is then developed for assessing these costs. This allows the effectiveness of different aid modalities to be compared, according to the characteristics of the aid transaction. The article shows that the choice of aid modality should depend on these characteristics and, therefore, that the minimisation of transaction costs should not be an end in itself.