Impact of health aid in developing countries: The public vs. the private channels

► We consider an allocation of foreign aid mixed between public and private channels. ► We study non-coop games involving households, a donor and the recipient government. ► We exhibit a gap between the Nash equilibrium and the optimal level of health-aid. ► In data, health aid actually reduces adult mortality in developing countries. ► In data, the actual allocation of aid-mix between both channels is not efficient.