stopping agents from cheating abstract when a principal hires two or more agents to work in a correlated environment each agent s reward will depend on the other s performance unfortunately with just the usual optimal incentive constrained contracts being offered the agents strictly prefer to play equilibrium strategies other than those desired by the principal they cheat however the principal can use a more subtle contractual mechanism to stop them from cheating at no extra cost this mechanism uses one agent to police the other and exploits certain properties of the optimal contracts

indirect effects of an aid program how do cash transfers affect ineligibles consumption cash transfers to eligible households indirectly increase the consumption of ineligible households living in the same villages this effect operates through insurance and credit markets ineligible households benefit from the transfers by receiving more gifts and loans and by reducing their savings thus the transfers benefit the local economy at large looking only at the effect on the treated underestimates the impact one should analyze the effects of this class of programs on the entire local economy rather than on the treated only and use a village level randomization rather than selecting treatment and control subjects from the same community

debt futures and options optimal price linked financial contracts under moral hazard and limited liability this paper characterizes the optimal financial contract between a risk neutral entrepreneur and risk neutral lender investors when the entrepreneur has limited liability there is moral hazard and the investor payoff function can depend on both output and output price but is nondecreasing in output in this setting the optimal contract is a price contingent commodity bond that can be replicated by combining pure debt commodity futures and commodity call option contracts although a pure commodity bond contract is sometimes optimal a pure debt contract is almost never optimal various properties of the entrepreneur s optimal price contingent promised payment are described copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

regression discontinuity analysis of gavi s impact on vaccination rates abstract since 2001 an aid consortium known as gavi has accounted for over half of vaccines purchased in the 75 eligible countries with an initial gni below 1 000 per capita regression discontinuity estimates suggest most aid for cheap existing vaccines like hepatitis b and dpt was inframarginal for instance hepatitis b doses sufficient to vaccinate roughly 75 of infants raised vaccination rates by single digit margins these results are driven by middle income countries near the eligibility threshold and do not preclude larger gains for the poorest countries global externalities via vaccine markets or impacts on newer vaccines such as pneumococcal or rotavirus for which income eligibility rules were relaxed

fungibility and the impact of development assistance evidence from vietnam s health sector how can the impact of aid be estimated in the presence of fungibility and how far does fungibility reduce its benefits these questions are analyzed in a context where a donor wants to target its efforts on a specific sector and specific geographic areas a traditional differences in differences method comparing the change in outcomes between the target and nontarget areas before and after the project risks misestimating the project s benefits the paper develops an alternative estimation method in which intersectoral fungibility reduces project benefits insofar as government spending has a smaller impact in the sector to which the funds leak than in the target sector while intrasectoral fungibility reduces benefits insofar as the donor is able to leverage productivity increases in government spending in the target areas the methods are applied to two contemporaneous world bank health projects that set out to target assistance on approximately one half of vietnam s provinces aid is not apparently fungible between vietnam s health sector and other sectors but is fungible across provinces within the health sector differences in differences yield an insignificant impact on infant mortality while the use of the new method yields a statistically significant impact of around 4 per 1000 live births the results however are ambiguous on the costs associated with intrasectoral fungibility

limited liability and incentive contracting with ex ante action choices abstract this article examines a principal agent model of financial contracting in which a risk neutral entrepreneur agent makes an unobservable ex ante effort choice while employing the investment funds of a risk neutral investor principal the key innovation is that the investment contract is subject to statutory liability limits given these liability limits two settings are considered one in which the investor payoff function is also constrained to be monotonically nondecreasing in firm profit and another in which no such monotonic contract constraint is imposed in the former case a standard debt contract is shown to emerge and a first best effort choice is not achieved in the latter setting the optimum is characterized by a live or die payoff function and a first best effort level may or may not be realized

when is foreign aid policy credible aid dependence and conditionality the author studies foreign aid policy within a principal agent framework he shows that one reason for foreign aid s poor overall record may be a moral hazard problem that shapes the aid recipient s incentive to undertake structural reform the model s basic prediction is a two way relationship disbursements of foreign aid are guided in part by the needs of the poor anticipating this recipients have little incentive to improve the welfare of the poor preliminary econometric work shows that the data support this hypothesis in principle conditionality could partly solve this problem but only if the donor can make a binding commitment to increase disbursements in good relative to bad states without such a commitment technology aid disbursements remain guided by the needs of the poor and recipient countries maintain a low effort to reduce poverty contrary to the conventional wisdom found in the aid literature the author shows that the welfare of all parties might be improved by using tied project aid or by delegating part of the aid budget to an international agency with less aversion to poverty

foreign aid and fiscal governance in melanesia summary recent research suggests that foreign aid is effective at spurring economic growth in recipient countries but its effectiveness is likely to depend upon a number of factors arguably the most important factor determining aid effectiveness is how recipient governments mediate foreign aid inflows this paper investigates this issue for the melanesian countries of fiji papua new guinea the solomon islands and vanuatu for the period 1989 2002 results suggest that foreign aid has led to increases in developmental expenditures and to falls in tax revenues and borrowing results also suggest a very different response to aid grants versus loans

internet advertising and the generalized second price auction selling billions of dollars worth of keywords we investigate the generalized second price gsp auction a new mechanism used by search engines to sell online advertising although gsp looks similar to the vickrey clarke groves vcg mechanism its properties are very different unlike the vcg mechanism gsp generally does not have an equilibrium in dominant strategies and truth telling is not an equilibrium of gsp to analyze the properties of gsp we describe the generalized english auction that corresponds to gsp and show that it has a unique equilibrium this is an ex post equilibrium with the same payoffs to all players as the dominant strategy equilibrium of vcg

incentive schemes with multiple agents and bankruptcy constraints abstract we explore the effects of bankruptcy constraints on incentive schemes when two risk neutral agents operate in correlated environments our focus is on the subgame equilibrium in which each agent is induced via a direct mechanism to truthfully reveal his private information as a nash response to truth telling by his counterpart we identify a class of examples in which in contrast to the case where the agents are risk averse the nash constraints induce a subgame dominant strategy equilibrium thus implementation via direct mechanisms is feasible for this class more generally however the truth telling nash equilibrium may be subgame dominated so the question of implementation via direct mechanisms remains a delicate one

analyzing the relationship between organic and sponsored search advertising positive negative or zero interdependence the phenomenon of paid search advertising has now become the most predominant form of online advertising in the marketing world however we have little understanding of the impact of search engine advertising on consumers responses in the presence of organic listings of the same firms in this paper we model and estimate the interrelationship between organic search listings and paid search advertisements we use a unique panel data set based on aggregate consumer response to several hundred keywords over a three month period collected from a major nationwide retailer store chain that advertises on google in particular we focus on understanding whether the presence of organic listings on a search engine is associated with a positive a negative or no effect on the click through rates of paid search advertisements and vice versa for a given firm we first build an integrated model to estimate the relationship between different metrics such as search volume click through rates conversion rates cost per click and keyword ranks a hierarchical bayesian modeling framework is used and the model is estimated using markov chain monte carlo methods our empirical findings suggest that click throughs on organic listings have a positive interdependence with click throughs on paid listings and vice versa we also find that this positive interdependence is asymmetric such that the impact of organic clicks on increases in utility from paid clicks is 3 5 times stronger than the impact of paid clicks on increases in utility from organic clicks using counterfactual experiments we show that on an average this positive interdependence leads to an increase in expected profits for the firm ranging from 4 2 to 6 15 when compared to profits in the absence of this interdependence to further validate our empirical results we also conduct and present the results from a controlled field experiment this experiment shows that total click through rates conversions rates and revenues in the presence of both paid and organic search listings are significantly higher than those in the absence of paid search advertisements the results predicted by the econometric model are also corroborated in this field experiment which suggests a causal interpretation to the positive interdependence between paid and organic search listings given the increased spending on search engine based advertising our analysis provides critical insights to managers in both traditional and internet firms

the impact of foreign aid on the fiscal behavior of asian ldc governments a comment on khan and hoshino 1992 abstract khan and hoshino 1992 analyze public sector fiscal behavior in the presence of foreign aid using data for five south and southeast asian countries this paper first questions a critical hypothesis test on which khan and hoshino s conclusions depend it then extends khan and hoshino s analysis making explicit both the direct and indirect effects of aid contained within their fiscal response model it argues that a number of khan and hoshino s conclusions do not hold in the context of this representation

a panel data analysis of the fungibility of foreign aid the donor community has been increasingly concerned that development assistance intended for crucial social and economic sectors might be used directly or indirectly to fund unproductive military and other expenditures the link between foreign aid and public spending is not straightforward because some aid may be fungible this article empirically examines the impact of foreign aid on the recipient s public expenditures using cross country samples of annual observations for 1971 90 for the base sample of 14 developing countries it finds that aid is not fungible at the aggregate level and there is no associated tax relief increasing the number of countries however makes aid fungible moreover results based on the main sample indicate that aid is fungible in three out of five sectors examined developing country governments receiving earmarked concessionary loans for agriculture education and energy reduce their own resources going to these sectors and use them elsewhere only loans to the transport and communication sector are fully spent on the purposes intended by donors because most aid appears to be fungible the rate of return on a specific donor funded project tells little about the impact of that assistance a better approach may be to tie foreign aid to an overall public expenditure program that provides adequate resources to crucial sectors

estimating aid allocation criteria with panel data in 1990 the net amount of economic aid or official development assistance to all recipients from all multilateral and bilateral sources was about 62 billion an amount that exceeded the gdps of greece and portugal despite the size of this yearly transfer there has been no rigors modeling and estimation of the criteria by which it occurs as a result there is little agreement about the extent to which oda is allocated according to the needs of the recipient countries the purpose of this paper is to develop a rigorous theoretical model of oda allocation that can be used to provide consistent estimates of the importance of recipient needs copyright 1994 by royal economic society

the generalized theory of transfers and welfare bilateral transfers in a multilateral world paul samuelson s 1952 1954 classic papers on the transfer problem addressed two separate analytical issues the positive effect of a transfer on the terms of trade and the welfare effect of the transfer on the donor and the recipient since then a considerable body of literature has grown up on the positive analysis while samuelson 1954 himself had extended the 2 x 2 x 2 free trade analysis to allow for tariffs and transport costs subsequent writers have analyzed other extensions of the model for example to allow for nontraded goods as with leisure in samuelson 1971 or general nontraded goods in john chipman 1974 and ronald jones 1970 1975 remarkably however the welfare analysis of transfers has not paralleled these developments since wassily leontief 1936 produced an example of immiserizing transfer from abroad and samuelson 1947 argued that the example required market instability the proposition that has monopolized attention has been that a transfer in the conventional 2 x 2 x 2 model in its free trade version cannot immiserize the recipient or enrich the donor as long as world markets are stable in the walras sense interestingly samuelson 1954 who did extend the positive analysis to include tariffs did not go on to ask whether immiserization of the transfer recipient and hence symmetrically enrichment of the donor in a two country model could now arise consistent with market stability recently the welfare analysis of transfers has been extended in two different directions both apparently unconnected and both yielding the conclusion that transfers from abroad can be immiserizing and that the donor may improve its welfare despite market stability one route to this conclusion has been the introduction of a third economic agent or country that is outside of the transfer process in the appendix of his 1960 paper analyzing the interaction between trade policy and income distribution harry johnson discussed the possibility of welfareparadoxical redistribution between two factor income classes capital and labor in an open economy thereby providing what can be interpreted as a treatment of the threeagent transfer problem for the case in which donor and recipient are both completely specialized in the ownership of a single different factor an independent analysis of the three agent transfer problem using a restrictive model with given endowments of goods and fixed coefficients in consumption was also undertaken in an important paper by david gale 1974 2 brecher and bhagwati bhagwati department of economics columbia university new york ny 10027 brecher department of economics carleton university ottawa on kis 5b6 hatta department of political economy the johns hopkins university baltimore md 21218 we thank the national science foundation grant no 524718 for partial financial support of the research underlying this paper the paper was written when brecher and hatta were visiting columbia university 1981 82 gratefully acknowledged are helpful comments and suggestions from john chipman avinash dixit jacques dreze robert feenstra jacob frenkel ronald jones murray kemp andreu mas colell michael mussa john riley lars svensson and robert willig from anonymous referees and from seminar participants at berkeley harvard minnesota rochester chicago and the university of california los angeles after the present paper was submitted for publication and following its presentation at rochester our attention was drawn to this appendix which was noticed by a student of ronald jones subsequently we learned from makoto yano that motoshige itoh had pointed out an important related paper by ryuotaro komiya and t shizuki 1967 whose condition 11 for the johnson case anticipated our equation 12 below we are grateful for having both of these references brought to our attention 2 gale constructs an example in which the donor is enriched along with the recipient furthermore this immediately implies that a reverse transfer will immis

competition for aid and trade policy this paper considers the optimal allocation of a given amount of foreign aid between two recipient countries it is shown that given consumer preferences a country following a more restrictive trade policy would receive a smaller share of the aid if the donor country maximises its own welfare in allocating aid if on the other hand the donor country allocates aid in order to maximize the sum of the welfare of the two recipient countries the result is just the opposite finally we analyze the situation where the recipient countries compete with each other for the given amount of aid it is shown that this competition tends to lower the level of optimal tariffs in the recipient countries

institutional markets financial marketing and financial innovation firms and institutions are monitored and controlled through a complex set of implicit and explicit contractual relations because of these agency theoretic relations institu tional behavior in financial markets is not a simple reflection of the preference structures of individuals institutional preferences give rise to a demand for new financial instru ments and innovations even when the returns on these instruments are spanned in the sense of complete pricing the innovations can be thought of as solving moral hazard problems an agency theoretic example serves to illustrate the demand supply and financial marketing of stripped securities in short institutions matter the past two decades have witnessed an explosion of financial innovations the changes are too varied and diffuse to permit an easy taxonomy but broadly they seem to fall into two classes first there are the new securities and their markets beginning with puts and calls we have moved on to euromarkets mortgage pass throughs and cmo s strips straps and swaps putable converti bles primes and scores and s p futures and all of the other instruments that inhibit the financial zoo second there are the dynamic trading strategies that make heavy use of the new instruments basket and program trading the asset pricing theories that now characterize different types of money management and the various incarnations of portfolio insurance have changed financial decision making as dramatically as the available array of instruments has changed along with these changes has come an enormous increase in the demand for the services of financial economists we are called upon not only to value the new instruments and the new strategies but to design them as well like engineers

impact of foreign aid on the fiscal behavior of ldc governments abstract the purpose of this paper is to examine the impact of foreign aid on the behavior of the recipient governments specifically we look at a sample of less developed countries in south and southeast asia and study their response to foreign aid received their response is measured in terms of their public investment and consumption as well as taxation our paper attempts to make two new contributions to the literature first we try to estimate the impact of foreign aid on a sample of five south and southeast asian countries secondly we improve on the earlier method of a combination of single equation and two step least squares by estimating the whole system with a nonlinear three step least squares method the results confirm the hypothesis that aid does affect consumption investment and taxation of these governments but they also show that the relationship is a complex one in particular grants and loans have different effects on investment and taxation

capital grants and regional public investment in spain fungibility of aid or crowding in effect the aim of capital grants to subcentral governments is to increase their investment however recipients may try to allocate additional resources to cut saving or deficit generating a crowding out effect on self financed investment using data from the spanish autonomous communities during the period 1984 to 1999 the effect of capital transfers on regional public investment saving and deficit are estimated econometric results demonstrate that capital grants have no relevance when explaining the dynamics of saving however in deficit regressions they are shown to be both significant and negative both results lead us to a partial long run crowding out effect of grants on self financed investment

does foreign aid promote the expansion of government building on the literature on public finance i seek to advance our understanding of variations in government size by exploring the impact of official development assistance on fiscal policy i hypothesize that foreign aid operates in accordance with the flypaper effect systematically generating incentives and opportunities for the expansion of government spending results from a time series cross sectional regression analysis of growth in government spending over the 1970 99 time period are consistent with the hypothesis for middle and lower income nations aid represents an important determinant of government expansion looking at the tax and revenue side of the equation however reveals a more perverse pattern of response aid promotes not only increased spending but also reduced revenue generation the results have important implications from both a theoretical and policy perspective inter alia they point to the potentially self defeating nature of efforts to promote market oriented programs of state retrenchment via development assistance as well as to the importance of incorporating international transfers into future research on government spending

skill development and regional mobility lessons from the australia pacific technical college abstractdeveloping countries can lose part of their investment in training skilled workers who later emigrate one innovative response is for migrants destination countries to help finance skilled emigrants training ex ante linking skill creation and skill mobility we describe one such project the australia pacific technical college aptc which has financed vocational training in five pacific island developing countries for employment both at home and abroad including employment in australia the aptc has attained its goal of skill creation but not its goal of skill mobility we offer explanations for this result and lessons for future policy innovation

good countries or good projects macro and micro correlates of world bank project performance abstract this paper investigates macro and micro correlates of aid financed development project outcomes using data from over 6000 world bank projects evaluated between 1983 and 2011 country level macro measures of the quality of policies and institutions are strongly correlated with project outcomes consistent with the view that country level performance matters for aid effectiveness however a striking feature of the data is that the success of individual development projects varies much more within countries than it does between countries a large set of project level micro variables including project size project length the effort devoted to project preparation and supervision and early warning indicators that flag problematic projects during the implementation stage accounts for some of this within country variation in project outcomes measures of world bank project manager quality also matter significantly for the ultimate project outcomes we discuss the implications of these findings for donor policies aimed at aid effectiveness

optimal foreign aid and tariffs this paper investigates the optimal choice of foreign aid when trade policies are decided in a non cooperative fashion three alternative scenarios depending on the timing of the actions and on whether aid is tied are analyzed it is shown that in the case where aid is decided before tariffs untied aid can lead to the reduction of the recipient s optimal trade tax when the donor can tie the aid to a reduction in the recipient s tariff the optimal aid level is always positive and the world can always achieve a pareto efficient equilibrium

the world bank improving environmental and natural resource policies power deregulation and privatization in post soviet armenia summary over the past decades development projects by international organizations like the world bank use concepts such as joint forest management community based natural resource management and participatory conservation as integrated approaches to poverty alleviation and conservation these integrated conservation and development projects primarily promote the intensification of natural resource production currently a research program on the pathways and politics through which international organizations influence related domestic policy and cause changes is being developed the aim of this study is to analyze the influence the world bank had on environmental and natural resources policies aiming at poverty alleviation in armenia we use armenia for analyzing how this neoliberal approach of the world bank echoes in a post soviet system empirically we use a qualitative case study design building on content analysis of key policy documents from world bank interventions and subsequent domestic policy changes our results show that the world bank interventions in armenia formally aiming to reduce rural poverty by means of improving natural resources management de facto promoted policy and administrative changes these changes however largely benefit transnational private companies while at the same time restricting the access of poor local users to natural resources by employing a discourse of illegal logging and by framing local actors as the main drivers of deforestation the world bank achieved considerable deregulation of the forest sector this in turn promoted privatization of the forestland as well as a reform of the state forest administration we conclude that interventions by international organizations such as the world bank may formally claim to enhance the common good e g through strengthening ecological goals in natural resources management informally however quite the opposite might happen neoliberal privatization and deregulation will further weaken state actors and their capacities while at the same time strongly and quickly incentivizing the increase in extractive natural resource production as observed with increased timber harvests and exports

debt relief for poor countries conditionality and effectiveness this paper studies the effectiveness of debt relief to stimulate economic growth in the most heavily indebted poor countries we develop a neoclassical framework with a conflict of interest between the altruistic donor and the recipient government and model conditionality as an imperfectly enforceable dynamic contract in contrast to the recent practice of fully cancelling debt optimal incentive compatible conditionality is accompanied by a concessionality level that implies a combination of subsidized loans and outright grants the optimal concessionality level depends on the recipient s access to international financial markets and on the strength of the conflict of interest incentive compatible transfers with optimal concessionality levels generate substantial welfare gains if the donor does not implement the optimal concessionality level and provides subsidized loans only then the effectiveness of transfers decreases in the long run with severe welfare implications in contrast transfers are less effective in the short run if the donor offers outright grants only

can the world cut poverty in half how policy reform and effective aid can meet international development goals abstract poverty in the developing world will decline by about one half by 2015 if the trends of the 1990s persist most of this poverty reduction will occur in asia however while poverty will decline only slightly in africa effective aid could make a contribution to greater poverty reduction in lagging regions even more potent would be significant policy reform in these countries we develop a model of efficient aid in which flows respond to policy improvements that create a better environment for poverty reduction and effective aid we investigate scenarios of policy reform and efficient aid that point the way to how the world can cut poverty in half in every major region

aid policies and growth the authors of this paper use a new database on foreign aid to examine the relationships among foreign aid economic policies and growth of per capita gdp in panel growth regressions for 56 developing countries and 6 four year periods 1970 93 they find that the policies that have a great effect on growth are those related to fiscal surplus inflation and trade openness they construct an index for those three policies and have that index interact with foreign aid they have instruments for both aid and aid interacting with policies they find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies in the presence of poor policies aid has no positive effect on growth this result is robust in a variety of specifications which include or exclude middle income countries include or exclude outliers and treat policies as exogenous or endogenous they examine the determinants of policy and find no evidence that aid has systematically affected policies either for good or for ill they estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors pursuit of their own strategic interests in a counterfactual they reallocate aid reduce the role of donor interests and increasing the importance of policy such a reallocation would have a large positive effect on developing countries growth rates

the effectiveness of aid on savings and investment in sub saharan africa do volatility and institutional quality matter abstractthe effectiveness of aid is somewhat subject to its volatility this study investigates the impact of aid volatility especially on savings and investment with a particular focus on the role of institutional quality in 45 sub saharan african ssa countries over the period from 1990 to 2013 we used the generalized method of moments gmm technique combined with a measure of volatility namely an averaged data method involving six 4 year sub periods our results suggest that while aid is positively associated with savings and investment its volatility is harmful to savings and investment however when higher quality institutions exist the volatility of aid has a less negative impact on savings and investment the policy implications are diverse first donors and ssa aid dependent countries need to take into account the diversity of shocks to which aid can respond in mitigating its unpredictability secondly ssa countries should be encouraged to establish the conditions for better quality inst

aid the public sector and the market in less developed countries a reply the article in this journal by mosley et al i987 concludes its analysis of aid effectiveness as demonstrating inability of development aid over more than twenty years to provide a net increment to overall growth in the third world p 636 this note purports to show that this conclusion which is ostensibly distressing as the authors claim is not warranted the section of the study which is the basis of the conclusion cited and the subject of this note is a cross section regression analysis full details of which are shown in mosley et al table 3 the note is concerned with the relation between the dependent variable specified as the growth rate of real gdp per cent per annum hereafter gdp and aid specified as a percentage of gdp hereafter aid the aid results with only two significant positive coefficients in one subsample certainly give no basis for claiming aid effectiveness in terms of gdp growth the intention in this note is to interpret the results which are assumed to be valid this is made possible by the fact that the authors have helpfully provided the full input set of mean values derived from the raw data from this it is possible to calculate the gdp aid relationship for each country for the second and third period the procedure for deriving these relationships is as follows for each country the mean values of the time series of gdp and aid are extracted from the data for i 960 70 and for i 970 80 using i 960 70 as the base the signs of the change in the levels of the gdp and aid mean values between periods are recorded this is repeated for i980 4 with i970 80 mean values as the base the relationship between the two signs is an indication of the effect of aid on gdp in the period in which the change in levels is effected thus in the case of an increase in aid being combined with a decrease in gdp the latter must have fallen relatively to the former and aid effectiveness is negative mutatis mutandis for the other three sign combinations thus generating the appropriate gdp aid relationship for each country in each period a frequency distribution of the four sign combinations relating to the full sample is presented in table i since the signs of the changes in the levels of gdp and aid are derived by making explicit the arithmetic relationship implicit in the data they form a valid base from which to draw conclusions without requiring any test of

supervision and performance the case of world bank projects abstract this paper explores the impact of donor supervision on development project performance using data from world bank funded projects maximum likelihood estimation of a restricted ordered probit function finds that early supervision has a positive impact on performance given the size of world bank funded projects gains from increasing supervision far outweigh the costs the results provide evidence of an institutional bias toward lending at the expense of increased development impact

paradoxes associated with the administration of foreign aid abstract this paper shows that if because of administration costs or other wastes only a proportion of an aid reaches the recipient then it is possible that the donor is enriched by its act of charity the extent of the enrichment increasing with the extent of the leakage and or that the recipient is impoverished by aid the extent of the impoverishment increasing with the extent of the leakage these outcomes are possible even when trade is optimally restricted by donor or recipient

limited liability contracts between principal and agent abstract the optimal strategy of the principal is examined in an environment where there are ex post limitations on the maximum penalty that can be imposed on a riskneutral agent contrary to the case in which such limitations are not imposed it is in the principal s interest to deliberately forego the opportunity to induce socially efficient behavior and to instead design a contract that induces the agent to realize an efficient outcome only in the most productive state of nature and perhaps in certain very unproductive states the properties of the contract are examined in detail

vertical contracting with informational opportunism we consider vertical contracting arrangements between a manufacturer and a retailing network when retailers have private information and the organization is run through bilateral contracts we highlight a new form of informational opportunism arising when the manufacturer manipulates information learned separately in each relationship we characterize the set of allocations robust to such opportunism by means of simple ex post incentive compatibility constraints those constraints limit the manufacturer s ability to use yardstick competition among retailers they simplify contracts and restore a rent efficiency trade off even with correlated information we show that sell out contracts are optimal under a wide range of circumstances

subgame perfect implementation this paper examines the use of stage mechanisms in implementation problems and provides a partial characterization of the set of subgam e perfect implementable choice rules it is shown that in many economic environments virtually an y choice rule can be implemented to illustrate the power of this approach the paper discusses a number of models in which it is possible to implement the first best although it wouldn t have been possible to do so without using stage mechanisms the diversity of these models suggests that subgame perfect implementation may find wide application copyright 1988 by the econometric society

does economic analysis improve the quality of foreign assistance the world bank undertakes an annual expenditure of around 60 million on country specific economic analysis and advice for its member developing countries what is the impact of this economic and sector work on the quality of world bank lending it will be useful to know whether past analytical work has generated measurable economic benefits that will justify its continued provision in an environment of increasingly scarce resources this article sets out an idealized model of decision making in which a country manager makes a broad allocation of resources between lending services and economic and sector work given that decision the task manager for each project makes project specific decisions with respect to the allocation of resources between preparation and supervision the analysis indicates that economic and sector work has a significant positive impact on the quality of world bank loans the results provide clear evidence of underinvestment in economic and sector work and the analysis shows that resources can be switched from preparation and supervision to economic and sector work to the benefit of both the quality of programs and level of disbursements

the macroeconomic impact of development aid a critical survey the early literature explained aid s macroeconomic impact in the context of the dual gap model showing a clear link between aid and growth many now believe that the empirical evidence shows there to be no such relationship this paper critically reviews the different theoretical perspectives the dual gap model the savings debate recipient fiscal response and aid as dutch disease and the empirical debates on aid savings and growth the basis for denying a relationship between aid and growth is shown to be weak though more recent areas of research offer promising directions for future work

is foreign aid fungible evidence from the education and health sectors this paper adopts a new approach to the issue of foreign aid fungibility in contrast to most existing empirical studies panel data are employed that contain information on the specific purposes for which aid is given this allows linking aid that is provided for education and health purposes to recipient public spending in these sectors in addition aid flows that are recorded on a recipient s budget are distinguished from those that are not recorded on budget and the previous failure to differentiate between on and off budget aid is shown to produce biased estimates of fungibility sector program aid is the measure of on budget aid whereas technical cooperation serves as a proxy for off budget aid the appropriate treatment of off budget aid leads to lower fungibility estimates than those reported in many previous studies specifically in both sectors and across a range of specifications technical cooperation which is the largest component of total education and health aid leads to at most a small displacement of recipient public expenditures

donor preferences and recipient fiscal behavior a simultaneous analysis of foreign aid we theoretically develop and empirically estimate a preference model determining foreign aid donor behavior aid access and levels are separately determined by endogenous budgetary allocations the international economic environment the distribution of income between countries basic human needs the small country effect and regional bias we find fungibility of aid in recipient budgets is due to donor and recipient preferences despite the importance of other economic influences we find a significant pro poor country bias in aid allocations although little aggregate influence of basic human needs or regional bias the small country effect is significant for two of six donors jel f35 o19 h 77

multi firm regulation without lump sum taxes abstract this paper considers a problem of multi firm regulation where the regulator cannot make monetary transfers to or from firms otherwise the set up is standard two firms charging two part tariffs sell in separate markets and marginal costs are private information without transfers the regulator faces an additional consumer participation constraint that the representative consumer must wish to participate in the market in all states the paper studies the second best optimal regulatory scheme that respects this constraint and shows that it has some surprising properties i the regulator may wish to drive informational rents down to zero even at the cost of some price distortion ii consumer surplus may be zero in some states and iii the price that one firm charges is decreasing in the other s cost

welfare effects of aid under quantitative trade restrictions the paper examines the effects of tied aid on the welfare of both the donor and the recipient countries we depart from the previous literature by assuming preexistence of quantitative trade distortions to mitigate these distortions the donor country provides aid that is tied to the rationed good conditions for the presence of the transfer paradox and of the enrichment of both countries are derived and interpreted under the stability of the system furthermore we show that whereas untied aid cannot increase global welfare tied aid unambiguously does so

performance incentives with award constraints this paper studies the provision of incentives in a large u s training organization which is divided in about 50 independent pools of training agencies the number and the size of the agencies within each pool vary greatly each pool distributes performance incentive awards to the training agencies it supervises subject to two constraints the awards cannot be negative and the sum of the awards cannot exceed an award budget we characterize the optimal award function and derive simple predictions about how award prizes should depend on the number of agencies on their sizes and on their performances our results indicate that the constraints on the award distribution bind and reduce the overall e ciency of the incentive system jel h72 j33 l14

fiscal effects of foreign aid in a federal system of governance the case of india abstract this paper models fiscal effects of foreign aid in a federal system of governance our main innovation is to incorporate the inter governmental fiscal link in examining economic fungibility of foreign aid the model is applied to the expenditure decisions of the central government of india the two main findings are i foreign aid merely substitutes for spending that the government would have undertaken anyway funds freed by aid are spent on non development activities and ii in passing earmarked external assistance to states the central government makes a reduction in its transfers to states these findings indicate that the central government s expenditure choices are unaffected by external assistance the implication for donors is that even though their development projects may be associated with very high rates of economic return they could be assisting the central government in financing something very different at the margin for the state governments the finding indicates that they may not be reaping the full benefits of externally procured assistance

competitive reactions to advertising and promotion attacks how do competitors react to each other s price promotion and advertising attacks what are the reasons for the observed reaction behavior we answer these questions by performing a large scale empirical study on the short run and long run reactions to promotion and advertising shocks in over 400 consumer product categories over a four year time span our results clearly show that the most predominant form of competitive response is passive in nature when a reaction does occur it is usually retaliatory in the same instrument i e promotion attacks are countered with promotions and advertising attacks are countered with advertising there are very few long run consequences of any type of reaction behavior by linking reaction behavior to both cross and own effectiveness we further demonstrate that passive behavior is often a sound strategy while firms that do opt to retaliate often use ineffective instruments resulting in spoiled arms accommodating behavior is observed in only a minority of cases and often results in a missed sales opportunity when promotional support is reduced the ultimate impact of most promotion and advertising campaigns depends primarily on the nature of consumer response not the vigilance of competitors

fiscal illusion and the grantor government empirical studies indicate that unconditional intergovernmental grants have a flypaper effect several authors have modeled recipient government spending under fiscal illusion to explain this phenomenon in short grants reduce the perceived marginal cost of recipient government output this paper develops a more general model of illusion that incorporates the grantor government thereby eliminating inconsistencies encountered in previous models the more general model implies that grant finance increases the perceived marginal cost of grantor government output thus grant induced illusion should have two effects an increase in recipient output and a decrease in grantor output the empirical work supports this hypothesis

the fungibility of u s military and non military assistance and the impacts on expenditures of major aid recipients abstract this paper examines the impact of u s military and non military assistance on the allocation of public and private sector spending for eight major recipients over the 1972 1987 period the model assumes that an aid recipient s effective post assistance budget constraint is a priori unknown and must be estimated two versions of the model are tested in version a the data is converted into real u s dollars using official exchange rates in version b the data is converted using purchasing power parity exchange rates provided by summers and heston 1991 major findings are the same for both versions u s aid is highly fungible with a significant portion channeled to the private sector where it finances current consumption relatively more than investment

limited liability and incentive contracting with multiple projects i examine a principal agent model with multiple projects where a risk neutral manager is protected by limited liability the analysis has several interesting implications i incentive problems are shown to be a natural source of economies of scope as combining multiple projects under the management of a single manager relaxes the limited liability constraint ii as a result managers may be overloaded with work and exert inefficiently high effort and iii the analysis has implications for the optimal allocation of projects to different managers copyright 2001 by the rand corporation

optimal incentive contracts with multiple agents abstract a setting in which a single principal contracts with two agents who possess perfect private information about their own productivity is considered with correlated productivities each agent s private information also provides a signal about the other agent s productivity in contrast to the setting in which there is only one agent it is shown that such private information may be of no value to the agents it is only if the agents are risk averse that their private information may allow them to command rents moreover when the agents are constrained only to reveal their private information truthfully as a nash equilibrium the pareto optimal incentive scheme may induce the agents to adopt strategies other than truth telling this leads to the consideration of truth telling equilibria that are not pareto dominated in the subgame played by the agents among all such equilibria the one preferred by the principal restricts one agent to tell the truth as a dominant strategy and the other as a nash response to truth

extraction of surplus under adverse selection the case of insurance markets abstract we consider a principal agent setting with two types of risk averse agents with different abilities to avoid losses abilities types are characterized by two distributions f and g which are agents private information all agents have the same increasing and strictly concave utility function u under which g has a higher certainty equivalent in this environment we derive a characterization of pairs of distributions under which a first best outcome can be achieved or approximated we prove that a first best outcome can be achieved if and only if the distribution f is not absolutely continuous with respect to the distribution g if this condition is not satisfied the first best outcome can be approximated arbitrarily close if and only if the likelihood ratio df dg is unbounded journal of economic literature classification number d82

assessing foreign aid s long run contribution to growth in development this paper confirms recent evidence of a positive impact of aid on growth and widens the scope of evaluation to a range of outcomes including proximate sources of growth e g physical and human capital indicators of social welfare e g poverty and infant mortality and measures of economic transformation e g share of agriculture and industry in value added focusing on long run cumulative effects of aid in developing countries and taking due account of potential endogeneity a coherent and favorable pattern of results emerges aid has over the past forty years stimulated growth promoted structural change improved social indicators and reduced poverty

nigeria during and after the oil boom a policy comparison with indonesia nigeria and indonesia provide an interesting contrast with regard to performance and policy during and after the oil boom roughly a decade after the first oil shock nigeria is faced with several economic problems including a serious decline in its agricultural sector and a deteriorating external debt situation while some decline in the nonoil traded goods sector reflects efficient adjustment to the oil boom policy with regard to public expenditure exchange rates pricing and the trade regime could exacerbate such decline and impede readjustment as the boom subsides the links between oil prices deficits inflation and real exchange rate appreciation are analyzed and nigerian and indonesian fiscal and exchange rate and agricultural and foreign borrowing strategies are compared it is concluded that with the exception of cuts in the deficit since 1984 nigerian policy following the boom has not been conducive to adjustment to the current period of low oil prices and high real interest rates corrective measures and policy options are discussed

to invest or insure how authoritarian time horizons impact foreign aid effectiveness in this article the author argues that the time horizon a dictator faces affects his incentives over the use of aid in three ways first dictators have a greater incentive to invest in public goods when they have a long time horizon second dictators with short time horizons often face the threat of challengers to the regime this leads them to forgo investment and instead consume state resources in two forms that harm growth repression and private pay offs to political opponents third dictators with short time horizons have a strong incentive to secure personal wealth as a form of insurance in case the regime falls using panel data on dictatorships in 71 developing countries from 1961 to 2001 the author finds that time horizons have a positive impact on aid effectiveness foreign aid is associated with positive growth when dictators face long time horizons and negative growth when time horizons are short

wearout effects of different advertising themes a dynamic bayesian model of the advertising sales relationship models of advertising response implicitly assume that the entire advertising budget is spent on disseminating one message in practice managers use different themes of advertising for example price advertisements versus product advertisements and within each theme they employ different versions of an advertisement in this study we evaluate the dynamic effects of different themes of advertising that have been employed in a campaign we develop a model that jointly considers the effects of wearout as well as that of forgetting in the context of an advertising campaign that employs five different advertising themes we quantify the differential wearout effects across the different themes of advertising and examine the interaction effects between the different themes using a bayesian dynamic linear model dlm such a response model can help managers decide on the optimal allocation of resources across the portfolio of ads as well as better manage their scheduling we develop a model to show how our response model parameters can be used to improve the effectiveness of advertising budget allocation across different themes we find that a reallocation of resources across different themes according to our model results in a significant improvement in demand

a latent instrumental variables approach to modeling keyword conversion in paid search advertising abstract the authors present a modeling approach to assess the purchase conversion performance of individual keywords in paid search advertising the model facilitates estimation of daily keyword conversion and click through rates in a sparse data environment while accounting for the endogenous position of the text advertisement served in response to a search position endogeneity in paid search data can arise from both omitted variables and measurement error the authors propose a latent instrumental variable approach to address this problem they estimate their model on keyword level paid search data containing daily information on impressions clicks and reservations for a major lodging chain they find that higher positions increase both the click through and conversion rates when advertisements are served in higher positions approximately one third of new conversions is due to increased click through while approximately two thirds are due to increased conversion rates the authors show that the ke

exogenous shocks foreign aid and civil war the recent civil war literature suggests that negative economic shocks in low income countries increase the risk of civil war foreign aid can be an effective conflict prevention tool in times of severe economic conditions aid cushions government spending from the downward pressures of economic shocks providing recipient governments with resources they can use to make rebellion a less attractive option for aggrieved domestic groups using official development assistance oda data covering 1990 through 2004 we find that foreign aid appears to be a useful tool for preventing civil wars in the wake of negative economic shocks and as such aid should be assessed by donors with these conflict suppressing aspects in mind

planning media schedules in the presence of dynamic advertising quality a key task of advertising media planners is to determine the best media schedule of advertising exposures for a certainbudget conceptually the planner could choose to do continuous advertising i e schedule ad exposures evenly overall weeks or follow a strategy of pulsing i e advertise in some weeks of the year and not at other times previous theoretical analyses have shown that continuous advertising is optimal for nearly all situations however pulsing schedules are very common in practice either the pract ice of pulsing is inappropriate or extant models have not adequately conceptualized the effects of advertising spending over time this paper offers a model that shows pulsing strategies can generate greater total awareness than the continuous advertising when the effectiveness of advertisement i e adquality varies overtime specifically ad quality declines because of advertising wearout during periods of continuous advertising and it restores due to forgetting effects during periods of no advertising such dynamics make it worth while for advertisers to stop advertising when ad quality becomes very low and wait for ad quality to restore beforestarting the next burst again as is common in practice based on the extensive behavioral research on advertising repetition and advertising wearout we extend the classical nerlove and arrow 1962 model by incorporating the notions of repetition wearout copy wearout and ad quality restoration repetition wearout is a result of excessive frequency beca use ad viewers perceive that there is nothing new to be gained from processing the ad they withdraw their attention or they become unmotivated to react to advertising information copy wearout refers to the decline inad quality due to passage of time independent of the level of frequency ad quality restoration is the enhancement of ad quality during media hiatus as a consequence of viewers forgetting the details of the advertised messages thus making ads appear like new when reintroduced later the proposed model has the property that when wearout effects are present a strategy of pulsing is superior to continuous advertising even when the advertising response function is concave this is illustrated by a numerical example that compares the total awareness generated by a single concentrated pulse of varying duration blitz schedules and continuous advertising the even schedule this property can be explained by the tension between the pressure to spend the fixed media budget quickly to avoid copy wearout and the opposing pressure to spread out the media spending over time to mitigate repetition wearout the proposed model is empirically tested by using brand level data from two advertising awareness tracking studies that also include the actual spen ding schedules the first data set is for a major cereal brand while the other is for a brand of milk chocolate such advertising tracking studies are now a common and popular means for evaluating advertising effectiveness in many markets e g millward brown narketmind in the empirical tests the model parameters are estimated by using the kalman filter procedure which is eminently suited for dynamic models because it attends to the intertemporal dependencies in awareness build up and decay via the use of conditional densities the estimated parameters are statistically significant have the expected signs and are meaningful from both theoretical and managerial viewpoints the proposed model fits both the data sets rather well and better than several well known advertising models namely the vidale wolfe brandaid litmus and trackermodels but not decisively better than the nerlove arrow model however unlike the nerlove arrow model the proposed model yields different total awareness for different strategies of spending the same fixed budget thus allowing media planners to discriminate among several media schedules given the empirical support for the model the paper presents an implementable approach for utilizing it to evaluate large numbers of alternative media schedules and determine the best set of media schedules for consideration in media planning this approach is based on an algorithm that combines a genetic algorithm with the kalman filter procedure the paper presents the results of applying this approach in the case studies of the cereal and milk chocolate brands the form of the best advertising spending strategies in each case was a pulsing strategy and there were many schedules that were an improvement over the media schedule actually used in each campaign

dynamic aid allocation abstract this paper introduces a framework for studying the optimal dynamic allocation of foreign aid among multiple recipients we pose the problem as one of weighted global welfare maximization a donor in the north chooses an optimal path for international transfers anticipating that consumption and investment decisions will be made by optimizing households in the south and accounting for limits in the extent to which recipients can effectively absorb aid we present quantitative results on optimal aid policy by applying our approach to a neoclassical growth model where the scope for aid funded growth is determined by the recipients distance from steady state

what explains the success or failure of structural adjustment programs in the 1980s development assistance shifted largely from financing investments such as roads and dams to promoting policy reform this change came because of a growing awareness that developing countries were held back more by poor policies than by a lack of finance for investment after nearly 20 years experience with policy based or conditional lending there have now been many studies of adjustment lending most of which take a case study approach many conclude that policy based lending works if countries have decided on their own to reform the authors examine a database of 220 world bank supported reform programs to identify why adjustment programs succeed or fail they find that a few political economy variables can successfully predict the outcome of an adjustment loan 75 percent of the time variables under the world bank s control resources devoted to preparation and supervision or number of conditions have no relationship with an adjustment program s success or failure what development agencies must do then is select promising candidates for adjustment support when the candidates is a poor selection devoting more administrative resources or imposing more conditions will not increase the likelihood of successful reform to improve its success rate with adjustment lending the world bank must become more selective and do a better job of understanding which environments are promising for reform and which are not that is likely to lead to fewer adjustment loans unless there is a significant change in the number of promising reformers to become more effective at supporting policy reform the agency must be willing to accept that this may lead to smaller volumes of lending

politics and the effectiveness of foreign aid abstract critics of foreign aid programs have long argued that poverty reflects government failure in this paper i test predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes i find that aid does not significantly increase investment nor benefit the poor as measured by improvements in human development indicators but it does increase the size of government the impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive but liberal political regimes and democracies ceteris paribus have on average 30 lower infant mortality than the least free regimes this may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs an implication is that short term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs

the capital budgeting process incentives and information we study the capital allocation process within firms observed budgeting processes are explained as a response to decentralized information and incentive problems it is shown that these imperfections can result in underinvestment when capital productivity is high and overinvestment when it is low we also investigate how the budgeting process may be expected to vary with firm or division characteristics such as investment opportunities and the technology for information transfer there is general agreement that investment decisions are the most important decisions made by corporations the choice of projects and the level of investment is critical not just for stakeholders of the firm but also for the economic well being of society as a whole it has been alleged that u s firms invest too little and tend to overemphasize short term results for example porter 1992 citing poterba and summers 1992 asserts that u s firms use hurdle rates to evaluate investment projects that are higher than their estimated costs of capital to understand the investment behavior of firms one must consider both the process by which external capital is made available to firms and the process by which internally and externally raised capital is allocated to investment projects within the firm considerable attention has been paid to how firms raise external capital the fundamental insight in this area is the celebrated result of modigliani and miller mm that capital structure is irrelevant in the absence of capital market frictions accordingly in the three decades since their contribution research on how external capital is raised has focused on market frictions including information and incentive problems relatively little research has focused on the internal allocation process and its relationship to the organization of the firm modern finance theory prescribes allocating capital according to the net present value npv rule just as the mm result itself provides no theory of the arrangements under which

are there lasting impacts of aid to poor areas abstract the paper re visits the site of a large world bank financed rural development program in china 10 years after it began and four years after disbursements ended the program emphasized community participation in multi sectoral interventions including farming animal husbandry infrastructure and social services data were collected on 2000 households in project and non project areas spanning 10 years a double difference estimator of the program s impact on top of pre existing governmental programs reveals sizeable short term income gains that were mostly saved only small and statistically insignificant gains to mean consumption emerged in the longer term though in rough accord with the average gain to permanent income the use of community based beneficiary selection greatly reduced the overall impact given that the educated poor were under covered the main results are robust to corrections for various sources of selection bias including village targeting and interference due to spillover effects generated by the response of local governments to the external aid

is foreign aid fungible the case of indonesia this paper considers whether foreign aid given for specific categories of expenditure is fungible among them and whether aid reduces tax effort by the recipient government models developed to analyze the fiscal relations among different levels of government in the united states are applied to analysis of the impact of foreign aid econometric analysis of data for indonesia reveals that aid is largely spent as the donors intended that aid does not lead to a reduction in tax effort and that aid is not diverted to nondevelopment current expenditures copyright 1990 by royal economic society

foreign aid and the question of fungibility this paper analyzes whether the foreign assistance provided for specific categories of expenditure is shifted among them contrary to the wishes of donors it also considers whether aid reduces the tax effort of recipient governments econometric results are presented for the dominican republic that show that the fungibility of aid has resulted in a thwarting of the intentions of donors an attempt is made to account for the observed differences in behavior of individual countries in altering expenditures copyright 1993 by mit press

environmental risks and bank liability abstract many governments have introduced or are considering introducing laws to recover from the liable parties the cleanup costs caused by pollution damages in particular the banks who finance the firms causing environmental damages may be considered liable in various court cases in the us and elsewhere banks have been found liable while they have been exempted in others we develop a model in which the insurance sector may insure the firm for the pollution risk and the bank may lend money for investment under complete information of the bank about the firm s activities the limited liability of the firm induces excessive investment and insufficient care but full liability of the bank creates the appropriate internalization of the environmental risk this rationalization of the laws on lender liability must be qualified because in general the banks suffer from agency problems adverse selection and moral hazard in their relationships with firms in the adverse selection case full liability of the bank leads to underinvestment partial liability is better but may fail to implement the optimal second best allocation in the case of moral hazard full responsibility is killing the project too often while still leading to low care too often partial responsibility may achieve the second best optimal allocation but in some cases the level of responsibility necessary to induce the proper level of care is too high for the project to be financed by the bank we conclude with a discussion of the implications of our results with regards to liability laws for environmental damages

more dollars than sense refining our knowledge of development finance using aiddata summary in this introductory essay to the special issue we introduce a new dataset of foreign assistance aiddata that covers more bilateral and multilateral donors and more types of aid than existing datasets while also improving project level information about the purposes and activities funded by aid we utilize that data to provide a brief overview of important trends in foreign aid contributors to this special issue draw on aiddata as well as other sources to analyze aid transparency new donors not previously described or analyzed aid allocation and aid effectiveness our recurring theme in this introductory essay is that aiddata and these initial academic projects refine rather than revolutionize our understanding of aid the database has added significant numbers of new projects dollar amounts donors and details about those projects though there is much more yet to add we worry that aid debates have been driven by too little information and that many claims are based on limited or very poor evidence rectifying these problems will not be instantaneous refining knowledge takes a lot of time and hard work the common feature of the papers in this special issue is their careful attention to nuance and detail in spite of what some recent authors have claimed aid is neither a simple solution nor a sufficient cause of most problems in developing countries its motivations distribution and effects are complex and shifting capturing this complexity requires detailed data careful thought and sophisticated methods that allow scholars to make conditional causal and descriptive inferences 2011 elsevier ltd all rights reserved

renegotiation proof labour and credit contracts with worker mobility this paper investigates the interaction between a privately informed firm s contracts for labour and its contracts for credit the analysis shows that if the worker has no ex post outside opportunities or if the liquidation value of the firm is large then the credit contract can always be state independent if the worker has outside opportunities and the liquidation value is small then the credit contract must be state dependent however if the worker is unable to precommit not to renegotiate with the firm then the credit contract must be state independent to ensure renegotiation proofness and protect the interests of the creditor this leads to credit rationing and under investment

aid and performance a reassessment two visions of aid effectiveness and allocation are compared the first corresponding to the new aid paradigm argues that aid is only effective if domestic policies are appropriate the second in contrast argues that aid effectiveness depends on the external and climatic environment the worse this environment or the more vulnerable the recipient countries the greater the effectiveness of aid cross sectional econometric tests related to gdp growth on two 12 year pooled periods clearly favour the second view the two views can be reconciled through the principle of performance based aid allocation where performance is defined as outcomes adjusted for the impact of environmental factors performance can then be measured in several manners which are subject to comparison one approach would lead one to allocate more aid the worse the external environment is for a given policy and the better the policy is for a given environment

optimal bidding in multi item multislot sponsored search auctions we study optimal bidding strategies for advertisers in sponsored search auctions in general these auctions are run as variants of second price auctions but have been shown to be incentive incompatible thus advertisers have to be strategic about bidding uncertainty in the decision making environment budget constraints and the presence of a large portfolio of keywords makes the bid optimization problem nontrivial we present an analytical model to compute the optimal bids for keywords in an advertiser s portfolio to validate our approach we estimate the parameters of the model using data from an advertiser s sponsored search campaign and use the bids proposed by the model in a field experiment the results of the field implementation show that the proposed bidding technique is very effective in practice we extend our model to account for interactions between keywords in the form of positive spillovers from generic keywords into branded keywords the spillovers are estimated using a dynamic linear