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Foreign Aid and Enlightened Leaders

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  • Roland Hodler
  • Paul Raschky

Abstract

To study whether foreign aid fuels personal, regional and ethnic favoritism, we use satellite data on nighttime light for any region in any aid-recipient country, and we determine for each year and each country the region in which the current political leader was born. Having a panel with 22,850 regions in 91 aid recipient countries with yearly observations from 1992 to 2005, we compare the effect of foreign aid on nighttime light across regions. We find that in countries with poor political institutions, this effect is significantly higher in the region in which the current political leader was born than in other regions. This finding suggests that a disproportionate share of foreign aid ends up in the leader's birth region, and we argue that it supports the view that foreign aid fuels favoritism, broadly defined. We find no such difference in aid-recipient countries with sound political institutions.

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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 54-10.

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Length: 39 pages
Date of creation: May 2010
Date of revision:
Handle: RePEc:mos:moswps:2010-54

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Keywords: Foreign aid; Political leaders; Favoritism; Political institutions;

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References

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  1. Bjørnskov, Christian, 2010. "Do elites benefit from democracy and foreign aid in developing countries?," Journal of Development Economics, Elsevier, vol. 92(2), pages 115-124, July.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Bruges ulandshjælp til at favorisere bestemte steder?
    by Christian Bjørnskov in Punditokraterne on 2010-12-05 17:44:58
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Cited by:
  1. Hannes Öhler & Peter Nunnenkamp, 2013. "Needs-Based Targeting or Favoritism? The Regional Allocation of Multilateral Aid within Recipient Countries," Kiel Working Papers 1838, Kiel Institute for the World Economy.
  2. Dominic Rohner & Mathias Thoenig & Fabrizio Zilibotti, 2012. "Seeds of Distrust: Conflict in Uganda," HiCN Working Papers 112, Households in Conflict Network.
  3. Jonathan R. W. Temple & Nicolas Van de Sijpe, 2014. "Foreign Aid and Domestic Absorption," CSAE Working Paper Series 2014-01, Centre for the Study of African Economies, University of Oxford.
  4. González, Mariano & Larrú, José María, 2012. "Egalitarian aid. The impact of aid on Latin American inequality," MPRA Paper 41660, University Library of Munich, Germany.
  5. Holger Breinlich & Gianmarco I.P. Ottaviano & Jonathan R.W. Temple, 2013. "Regional growth and regional decline," Economics Discussion Papers 729, University of Essex, Department of Economics.
  6. Burgess, Robin & Jedwab, Remi & Miguel, Edward & Morjaria, Ameet & Padró i Miquel, Gerard, 2013. "The Value of Democracy: Evidence from Road Building in Kenya," CEPR Discussion Papers 9627, C.E.P.R. Discussion Papers.
  7. José María, Larrú, 2012. "La relación entre la ayuda al desarrollo y la desigualdad. Evidencia y justificación teórica
    [Aid and inequality relationship. Evidence and theoretical justification]
    ," MPRA Paper 38857, University Library of Munich, Germany.

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