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Does foreign aid improve governance?

Author

Listed:
  • Busse, Matthias
  • Gröning, Steffen

Abstract

This paper analyses the impact of aid flows on governance. Using an instrumental variable approach and a large country sample, we find that aid has a negative rather than a positive influence on governance. This outcome is robust to various model specifications.

Suggested Citation

  • Busse, Matthias & Gröning, Steffen, 2009. "Does foreign aid improve governance?," Economics Letters, Elsevier, vol. 104(2), pages 76-78, August.
  • Handle: RePEc:eee:ecolet:v:104:y:2009:i:2:p:76-78
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    References listed on IDEAS

    as
    1. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
    2. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    3. Brautigam, Deborah A & Knack, Stephen, 2004. "Foreign Aid, Institutions, and Governance in Sub-Saharan Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 52(2), pages 255-285, January.
    4. Raghuram Rajan & Arvind Subramanian, 2007. "Does Aid Affect Governance?," American Economic Review, American Economic Association, vol. 97(2), pages 322-327, May.
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    Citations

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    Cited by:

    1. Nunnenkamp, Peter & Öhler, Hannes, 2011. "Throwing Foreign Aid at HIV/AIDS in Developing Countries: Missing the Target?," World Development, Elsevier, vol. 39(10), pages 1704-1723.
    2. repec:pal:eurjdr:v:29:y:2017:i:2:d:10.1057_ejdr.2016.16 is not listed on IDEAS
    3. Unbreen Qayyum, 2013. "Institutional Quality, Conflict and Aid Dependency," PIDE-Working Papers 2013:94, Pakistan Institute of Development Economics.
    4. Yenner Altunbas & John Thornton & Chrysovalantis Vasilakis, 2015. "More foreign aid, less financial development," Working Papers 15007, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    5. Audrey Rose Menard, 2014. "Do natural resources condition the aid-governance relationship? Evidence from Africa," Economics Bulletin, AccessEcon, vol. 34(2), pages 1317-1326.
    6. Rainer Schweickert & Inna Melnykovska & Ansgar Belke & Ingo Bordon, 2011. "Prospective NATO or EU membership and institutional change in transition countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 19(4), pages 667-692, October.
    7. Balázs Szent-Iványi, 2015. "Are Democratising Countries Rewarded with Higher Levels of Foreign Aid?," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 65(4), pages 593-615, December.
    8. David Fielding, 2014. "The Dynamics of Aid and Political Rights," The World Economy, Wiley Blackwell, vol. 37(9), pages 1197-1218, September.
    9. Zohid Askarov & Hristos Doucouliagos, 2013. "Does aid improve democracy and governance? A meta-regression analysis," Public Choice, Springer, vol. 157(3), pages 601-628, December.
    10. Jones, Sam & Tarp, Finn, 2016. "Does foreign aid harm political institutions?," Journal of Development Economics, Elsevier, vol. 118(C), pages 266-281.
    11. Nadeem, Muhammad & Hayat, Muhammad Azmat & Nazir, Rabia, 2014. "Exploring Interlinks between Globalization and Governance: A Panel Data Evidence," MPRA Paper 61337, University Library of Munich, Germany.
    12. Cristina Boţa-Avram, 2013. "The Interplay Between Governance and Global Competitiveness: Evidence from a Cross-Country Survey," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 20(3), pages 381-388, November.
    13. Wako, Hassen, 2016. "Aid, institutions and economic growth: Heterogeneous parameters and heterogeneous donors," MERIT Working Papers 009, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    14. repec:elg:eechap:15325_15 is not listed on IDEAS
    15. Juan Felipe Riaño-Rodríguez, 2014. "More than Words and Good Intentions: The Political Agenda-Setting Power," DOCUMENTOS CEDE 011011, UNIVERSIDAD DE LOS ANDES-CEDE.
    16. Gema Fabro & José Aixalá, 2013. "Do the Models of Institutional Quality Differ According to the Income Level of the Countries? The Case of the Low-Income Countries," Hacienda Pública Española, IEF, vol. 206(3), pages 11-26, September.
    17. Yener Altunbas & John Thornton, 2010. "Does Paying Taxes Improve the Quality of Governance? Cross-Country Evidence," Working Papers 10006, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    18. repec:eee:finana:v:53:y:2017:i:c:p:66-79 is not listed on IDEAS
    19. Belke, Ansgar & Bordon, Ingo G. & Melnykovska, Inna & Schweickert, Rainer, 2009. "Prospective membership and institutional change in transition countries," Kiel Working Papers 1562, Kiel Institute for the World Economy (IfW).
    20. L. Chauvet & H. Ehrhart, 2015. "Aid and Growth. Evidence from Firm-Level Data," Working papers 563, Banque de France.
    21. Hagen, Rune Jansen, 2014. "Rents and the Political Economy of Development Aid," Working Papers in Economics 07/14, University of Bergen, Department of Economics.
    22. repec:got:cegedp:111 is not listed on IDEAS

    More about this item

    Keywords

    Official development assistance Governance;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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