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On the channels of foreign aid to corruption

Author

Listed:
  • Simplice A Asongu

    () (African Governance and Development Institute)

  • Jellal Mohamed

    () (Al Makrîzi Institut d''Economie)

Abstract

The debate by Okada & Samreth (2012, EL) and Asongu (2012, EB; 2013, EEL) on ‘the effect of foreign aid on corruption' in its current state has the shortcoming of modeling corruption as a direct effect of development assistance. This note extends the debate by assessing the channels of foreign aid to corruption in 53 African countries for the period 1996-2010. Two main findings are established to unite the two streams of the debate. (1) Foreign aid channeled through government's consumption expenditure increases corruption. (2) Development assistance channeled via private investment and tax effort decreases corruption. It follows that foreign aid that is targeted towards reducing corruption should be channeled via private investment and tax effort, not through government expenditure. Our results integrate an indirect component and reconcile the debate by showing that, the effect could either be positive or negative depending on the transmission channel.

Suggested Citation

  • Simplice A Asongu & Jellal Mohamed, 2013. "On the channels of foreign aid to corruption," Economics Bulletin, AccessEcon, vol. 33(3), pages 2191-2201.
  • Handle: RePEc:ebl:ecbull:eb-13-00454
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Simplice A. Asongu & Jacinta C. Nwachukwu, 2016. "The role of lifelong learning on political stability and non violence: evidence from Africa," Journal of Economic Studies, Emerald Group Publishing, vol. 43(1), pages 141-164, January.
    2. Simplice Asongu, 2014. "The Questionable Economics of Development Assistance in Africa: Hot-Fresh Evidence, 1996–2010," The Review of Black Political Economy, Springer;National Economic Association, vol. 41(4), pages 455-480, December.
    3. Asongu, Simplice & Nwachukwu, Jacinta, 2016. "Is the Threat of Foreign Aid Withdrawal an Effective Deterrent to Political Oppression? Evidence from 53 African Countries," MPRA Paper 74649, University Library of Munich, Germany.
    4. John Ssozi & Simplice A. Asongu, 2016. "The Effects of Remittances on Output per Worker in Sub-Saharan Africa: A Production Function Approach," South African Journal of Economics, Economic Society of South Africa, vol. 84(3), pages 400-421, September.
    5. Asongu , Simplice A., 2015. "On the dynamic effects of foreign aid on corruption," European Economic Letters, European Economics Letters Group, vol. 4(1), pages 5-10.
    6. Menard, Audrey-Rose & Weill, Laurent, 2016. "Understanding the link between aid and corruption: A causality analysis," Economic Systems, Elsevier, vol. 40(2), pages 260-272.
    7. repec:bla:socsci:v:98:y:2017:i:1:p:282-298 is not listed on IDEAS
    8. Simplice Asongu, 2016. "Reinventing Foreign Aid For Inclusive And Sustainable Development: Kuznets, Piketty And The Great Policy Reversal," Journal of Economic Surveys, Wiley Blackwell, vol. 30(4), pages 736-755, September.
    9. Simplice Asongu & Jacinta C Nwachukwu, 2015. "The incremental effect of education on corruption: evidence of synergy from lifelong learning," Economics Bulletin, AccessEcon, vol. 35(4), pages 2288-2308.
    10. Simplice Asongu & Mohamed Jellal, 2014. "Foreign aid, investment and fiscal policy behavior: theory and empirical evidence," Working Papers 14/030, African Governance and Development Institute..
    11. Simplice A. Asongu & Jacinta C. Nwachukwu, 2017. "Foreign Aid and Inclusive Development: Updated Evidence from Africa, 2005–2012," Social Science Quarterly, Southwestern Social Science Association, vol. 98(1), pages 282-298, March.
    12. Asongu, Simplice, 2014. "Taxation, foreign aid and political governance: figures to the facts of a celebrated literature," MPRA Paper 63792, University Library of Munich, Germany.
    13. Asongu Simplice, 2014. "Fighting African corruption when existing corruption-control levels matter in a dynamic cultural setting," International Journal of Social Economics, Emerald Group Publishing, vol. 41(10), pages 906-922, October.
    14. Simplice Asongu, 2015. "On Taxation, Political Accountability and Foreign Aid: Empirics to a Celebrated Literature," South African Journal of Economics, Economic Society of South Africa, vol. 83(2), pages 180-198, June.
    15. Simplice A. Asongu & Jacinta C. Nwachukwu, 2016. "Foreign aid and governance in Africa," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(1), pages 69-88, January.
    16. Asongu Simplice, 2014. "The Evolving Debate on the Effect of Foreign Aid on Corruption and Institutions in Africa," Working Papers 14/009, African Governance and Development Institute..
    17. Asongu, Simplice A & Nwachukwu, Jacinta C., 2015. "Foreign aid instability and bundled governance dynamics in Africa," MPRA Paper 71783, University Library of Munich, Germany.
    18. Simplice Anutechia Asongu, 2014. "On foreign aid distortions to governance," AAYE Policy Research Working Paper Series 14_015, Association of African Young Economists, revised Oct 2014.
    19. Simplice Asongu, 2014. "Reinventing foreign aid for inclusive and sustainable development: a survey," Working Papers 14/033, African Governance and Development Institute..
    20. Simplice A Asongu, 2015. "A Good Turn Deserves Another: Political Stability, Corruption and Corruption-Control," Economics Bulletin, AccessEcon, vol. 35(4), pages 2037-2048.
    21. Simplice Asongu, 2014. "On the Effect of State fragility on Corruption," Working Papers 14/040, African Governance and Development Institute..
    22. Simplice Asongu, 2014. "A brief clarification to the questionable economics of foreign aid for inclusive human development," Working Papers 14/028, African Governance and Development Institute..

    More about this item

    Keywords

    Foreign Aid; Political Economy; Development; Africa;

    JEL classification:

    • F5 - International Economics - - International Relations, National Security, and International Political Economy
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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