The Economic Organization of Disaster Relief

2 January 2012 at 1:01 pm 1 comment

| Peter Klein |

J. Vernon Henderson and Yong Suk Lee have released a fascinating study of the make-or-buy decision in the provision of disaster relief. “We distinguish four organizational structures by implementation method. . . . (1) donor-implementers who are NGO donors who do their own implementation in villages, (2) international implementers who represent different donors who choose not to do their own implementation, (3) domestic implementers hired by donors which have chosen neither to do their own implementation nor to hire an international implementer, and (4) a country level governmental organization . . . used primarily by domestic and foreign governments.” Henderson and Lee find that donor-implementers offer the highest-quality aid, and the government agency the lowest, with the contract implementers in-between. The framework is agency theory, not transaction cost economics, but there may be a role for asset specificity as well, particularly in cases where a longer-term commitment is required. In any case, this is an interesting and important application of organizational economics to an unconventional setting.

Entry filed under: - Klein -, Institutions, New Institutional Economics, Public Policy / Political Economy, Strategic Management, Theory of the Firm. Tags: .

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1 Comment Add your own

  • 1. Michael E. Marotta  |  4 January 2012 at 8:32 pm

    While it certainly suggests what I want to believe, the data set might be a bit restricted: “We analyze three waves of survey data on fishermen and fishing villages in Aceh, Indonesia from 2005-2009, following the tsunami.”

    Also, it seems that the story is bit more nuanced:
    “Some well known international NGOs delivered housing with relatively low rates of reported faults such as leaky roofs and cracked walls; others had relatively high rates. For boats, some had very high rates of boat “failure”, boats that sank upon launch, were not seaworthy, or fell apart within a month or two. We also document how a social agenda of particular agencies to promote greater equality can be thwarted and distorted by village leaders, potentially increasing inequality.”

    But for the want of a spare fin, I must forego the deeper insights…

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