Sorting out the aid–corruption nexus

Abstract

We employ matching methods to explore the relationships between foreign aid flows and corruption in recipient countries. Data are drawn from recipients of foreign aid for the 1996–2013 period. We find no compelling evidence of an effect running from corruption to aid flows. Furthermore, point estimates imply that corruption reforms lead countries to receive less aid. Alternatively, we generally find that, over a 10-year horizon, a sustained increase in aid leads to more corruption in a recipient. It is the sustained nature of an aid increase that seems to be important for this effect. (We generally do not report significant results for large changes in aid that are not sustained over time.)

Chinese aid and corruption in African local governments

“…On one hand, some scholars argue that foreign aid exacerbates corruption in developing countries (Svensson, 2000) and that a vicious cycle exists between foreign assistance and economic development when corruption is widespread (Knack, 2001; Moyo, 2009). According to a recent study conducted by Pavlik and Young (2021), it was discovered that a continuous rise in aid is associated with an escalation in corruption within the recipient nation. On the other hand, other studies suggest that foreign aid can actually mitigate corruption in developing countries through statistical analyses (Mohamed et al, 2015; Okada & Samreth, 2012; Tavares, 2003).…”

‘We help them, and they help us’: Reciprocity and relationality in Chinese aid to Africa

“…Critical scholars highlight the gap between the rhetoric of equality and power asymmetries in the relationship (Benabdallah, 2020; Carrozza & Benabdallah, 2022) and explain specific (e.g., collaterals) and diffuse (i.e., political support in the UN) reciprocity with China's ability to coerce or corrupt recipients (Eisenman, 2022). The rhetoric is undoubtedly employed strategically (Link, 2013; Schoenhals, 1992), and the link between aid and corruption has been documented in the literature beyond China (Pavlik & Young, 2022). Still, it merits engagement: The rhetoric of ‘mutual benefit’ or ‘win–win’—to which I refer here as reciprocity , and of ‘friendship’—to which I refer here as relationality , has been fairly constant from the mid‐1950s till today (Strauss, 2019) and largely congruent with the language, which China's recipients in the Non‐Aligned Movement (NAM) have employed for South–South Cooperation since Bandung.…”

Does aid cause changes in economic freedom?

“…We address the above concerns by following Hausmann et al (2005), Grier andGrier (2021), andBologna Pavlik andYoung (2021) in employing matching methods. Matching methods are non-parametric and, following Bologna Pavlik and Young (2021), we are able to (i) define a treatment in terms of a specific type of change-sustained, large, large, and sustained-in aid flows, (ii) identify countries that received a treatment, and (iii) construct for each treated country a plausible counterfactual against which to compare subsequent changes in economic freedom. We construct the counterfactuals based on covariates that plausibly determine the probability of treatment and/or are otherwise correlated the subsequent economic freedom changes.…”

“…Alternatively, Knack (2004) fail to find a significant impact on political institutions and Jones and Tarp (2016) actually find a small positive effect on political institutions. Most recently, Bologna Pavlik and Young (2021) find that aid flows are associated with subsequent increases in corruption. Aside from the last of these studies, all of them problematic in the same way that the aid‐economic freedom studies are (see above).…”