ISP Working Paper Number 06-13

Pocketing and Deceiving: The Behavior of Agency in a Donor - Delivery Agency - Recipient Organization

Jorge Martinez-Vazquez, Baoyun Qiao and Younsheng Xu, February 2006

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Abstract:

This paper presents a simple model to analyze the corrupt behavior of the delivery agency in a donor-delivery agency-recipient organization. Corrupt behavior of the delivery agency can take two forms: (i) “pocketing” or where the delivery agency distributes only a portion of the relief fund to the recipient and keeps the remaining fund to itself, and (ii) “deceiving”, where the delivery agency provides false information to the donor regarding the need of the recipient. We show that both forms of behavior can emerge as equilibrium outcomes in this type of organization. We identify factors that influence such corrupt behaviors and draw some policy implications.