Working Paper: CEPR ID: DP6511
Authors: Gani Aldashev; Thierry Verdier
Abstract: What are the effects of the integration of markets for private donations for development on NGOs? performance? How is the welfare of donors and beneficiaries affected? To answer these questions, we build a model of a market for development donations with horizontally differentiated NGOs competing by fundraising effort. We compare three regimes: autarky, full integration, and the regime of multinational NGOs (in which NGOs have to establish foreign affiliates to raise funds abroad). The welfare impact of market integration depends on the interplay between three factors: returns to scale in the NGO production technology, donors? "taste for variety", and the effectiveness of aggregate fundraising in motivating new donors.
Keywords: internationalization; monopolistic competition; NGOs; non-distribution constraint
JEL Codes: F12; F23; L31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Integration of donation markets (D64) | Increased number of NGO varieties (L31) |
| Increased number of NGO varieties (L31) | Enhanced donor welfare (D69) |
| Competition among NGOs (L31) | Improved overall welfare (D69) |
| Multinational NGOs (L31) | Positive effect on welfare of beneficiaries (I38) |
| Weak returns to scale (D24) | Reduction in average project impact per NGO (L31) |
| Reduction in average project impact per NGO (L31) | Harm to welfare of beneficiaries (I39) |
| Comparison between full integration and multinational NGOs (L31) | Trade-off between exploitation of returns to scale and variety effect (F12) |
| Strong returns to scale (D24) | Multinational NGOs dominate (L31) |
| Weak returns to scale (D24) | Full integration yields better outcomes (F15) |