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Corruption And International Aid Allocation: A Complex Dance

Author

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  • LAUREN E. LOPEZ

    (The Ohio State University, USA)

Abstract

This paper studies the relationship between donor governments' Official Development Assistance (ODA) decisions and corruption in recipient countries over the period 1999-2010. Previous studies found that donors do not penalize recipients on the basis of corruption. Using a rich panel data set, this paper estimates the effect of corruption on aid using donor-recipient fixed effects and disaggregating aid into sectors which may vary in sensitivity to corruption. Overall, there is a moderately significant, negative effect of corruption on aid. This relationship varies across sectors - corrupt recipients receive more humanitarian assistance and less production sector and social infrastructure aid.

Suggested Citation

  • Lauren E. Lopez, 2015. "Corruption And International Aid Allocation: A Complex Dance," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 40(1), pages 35-61, March.
    • Handle: RePEc:jed:journl:v:40:y:2015:i:1:p:35-61
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    References listed on IDEAS

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    1. Jean‐Claude Berthélemy, 2006. "Bilateral Donors’ Interest vs. Recipients’ Development Motives in Aid Allocation: Do All Donors Behave the Same?," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 179-194, May.
    2. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
    3. Alesina, Alberto & Dollar, David, 2000. "Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
    4. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    5. Alessia Isopi & Fabrizio Mattesini, 2008. "Aid and Corruption: Do Donors Use Development Assistance to Provide the “Right” Incentives?," CEIS Research Paper 121, Tor Vergata University, CEIS, revised 14 Jul 2008.
    6. Svensson, Jakob, 2000. "When is foreign aid policy credible? Aid dependence and conditionality," Journal of Development Economics, Elsevier, vol. 61(1), pages 61-84, February.
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    Cited by:

    1. Paulo Francisco & Sandrina B. Moreira & Jorge Caiado, 2025. "Is Democracy More Important than Corruption in the Allocation of Foreign Aid?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 37(3), pages 643-665, June.
    2. Abiola Abidemi Akinsanya, 2020. "Understanding the Role of Aid for Trade in Enhancing Corridor Development and Regional Integration in West Africa: Lessons and Policy Directions," Advances in African Economic, Social and Political Development, in: Gbadebo O.A. Odularu & Mena Hassan & Musibau Adetunji Babatunde (ed.), Fostering Trade in Africa, pages 183-211, Springer.

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    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid

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