This chapter argues that the incentives generated by development aid’s institutions are important in explaining its lackluster outcomes. Understanding the incentives that confront donors and recipients requires knowledge of the fundamental collective-action problems that these actors face. Such problems may lead individuals seeking to improve their lot to choose actions that actually undermine their well-being. Even before aid flows into a country, these basic, day-to-day problems need solutions if foreign assistance is to produce successful and sustainable results.
Keywords: development aid, incentives, collective action, institutions, sustainability, ownership, donors, recipients,