'NGOzation' of Latin America: A Study of Donors, NGOs, and the Poor
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Publisher:The Ohio State University
Series/Report no.:The Ohio State University. Department of Political Science Honors Theses; 2007
Since 1980, there has been exponential increases in the amount of international funds and local non-governmental organizations (NGOs) working in development projects in Latin America. However, the welfare of the Poor continues to decline. This study asks why project outcomes have not matched their resource-increase. The unit of analysis is the relationships between project actors: foreign government donors (Donors), local NGOs (NGOs) and the local Poor (Poor). Game theory is the methodology of study. Findings based on a six-month field study in Lima, Peru and literature reviews are analyzed through principal-agent, asymmetric information and Nash equilibrium models. Principal-agent problems indicate that development interests between Donors and the Poor often diverge. And in that divergence, some NGOs abide by Donor interests at the expense of Poor interests. Transactions made under little monitoring and asymmetric information between service providers (NGOs) and buyers (Donors and Poor) make detecting opportunistic NGOs difficult. By misrepresenting information, opportunistic NGOs crowd out Poor-representative NGOs from Donor selections. Obstruction of information updates also leads to a suboptimal Nash equilibrium of ineffective development projects. Because of the projects’ structural dilemmas, abundant material resources alone are insufficient towards improving the Poor’s welfare. The study proposes a reallocation of resources where donors invest in buying information. They should employ independent evaluators to select NGOs and subgroups of the Poor whose interests truly align with Donor interests. Convergent interests and better information provide the first steps towards achieving an optimal Nash equilibrium where all actors can reach higher utilities, especially the Poor.
University Honors & Scholars Center, Department of Economics, Arts & Sciences College, Social & Behavioral Sciences College