IDEAS home Printed from https://ideas.repec.org/a/pal/eurjdr/v37y2025i3d10.1057_s41287-025-00695-8.html
   My bibliography  Save this article

Is Democracy More Important than Corruption in the Allocation of Foreign Aid?

Author

Listed:
  • Paulo Francisco

    (Universidade de Lisboa)

  • Sandrina B. Moreira

    (Escola Superior de Ciências Empresariais, Instituto Politécnico de Setúbal (RESILIENCE, ESCE/IPS) and BRU-IUL (Business Research Unit))

  • Jorge Caiado

    (Universidade de Lisboa)

Abstract

The shocks that recently affected the world economy have raised doubt about the feasibility of pledges concerning the mobilisation of private resources for developing countries, once again highlighting the potential role of Official Development Assistance, or foreign aid. The literature has established that recipients’ policies have a prominent influence on donors’ aid allocation. The novelty of this research lies in examining whether the level of recipients’ democracy prevails over the level of corruption. The overall results show that the level of democracy has a positive and significant association with the volume of aid received, while there is no evidence that recipients’ absence of corruption has a significant positive association with the amount of aid received. The European Union’s aid allocation (as a multilateral entity) is positively associated with the recipients’ level of democracy, but not with the level of corruption, the latter in contrast to the World Bank.

Suggested Citation

  • 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.
    • Handle: RePEc:pal:eurjdr:v:37:y:2025:i:3:d:10.1057_s41287-025-00695-8
    DOI: 10.1057/s41287-025-00695-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41287-025-00695-8
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41287-025-00695-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Bickenbach, Frank & Mbelu, Asithandile & Nunnenkamp, Peter, 2019. "Is foreign aid concentrated increasingly on needy and deserving recipient countries? An analysis of Theil indices, 1995–2015," World Development, Elsevier, vol. 115(C), pages 1-16.
    2. Gründler, Klaus & Potrafke, Niklas, 2019. "Corruption and economic growth: New empirical evidence," European Journal of Political Economy, Elsevier, vol. 60(C).
    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. Jean-Claude Berthélemy, 2006. "Aid Allocation: comparing donors' behaviours," Post-Print halshs-00305484, HAL.
    5. Beck, Nathaniel & Katz, Jonathan N., 1995. "What To Do (and Not to Do) with Time-Series Cross-Section Data," American Political Science Review, Cambridge University Press, vol. 89(3), pages 634-647, September.
    6. Ramin Dadasov, 2017. "European Aid and Governance: Does the Source Matter?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 29(2), pages 269-288, April.
    7. Alessia Isopi & George Mavrotas, 2006. "Aid Allocation and Aid Effectiveness: An Empirical Analysis," WIDER Working Paper Series RP2006-07, World Institute for Development Economic Research (UNU-WIDER).
    8. Oscar Becerra & Eduardo Cavallo & Ilan Noy, 2014. "Foreign Aid in the Aftermath of Large Natural Disasters," Review of Development Economics, Wiley Blackwell, vol. 18(3), pages 445-460, August.
    9. Samuel Brazys, 2016. "Aid and Governance: Negative Returns?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 28(2), pages 294-313, April.
    10. Fuchs, Andreas & Dreher, Axel & Nunnenkamp, Peter, 2014. "Determinants of Donor Generosity: A Survey of the Aid Budget Literature," World Development, Elsevier, vol. 56(C), pages 172-199.
    11. repec:oup:ecpoli:v:22:y:2007:i::p:633-678 is not listed on IDEAS
    12. William Easterly, 2007. "Are aid agencies improving? [‘Who gives foreign aid to whom and why?’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 22(52), pages 634-678.
    13. repec:bla:ecpoli:v:22:y:2007:i::p:633-678 is not listed on IDEAS
    14. Berthelemy, Jean-Claude & Tichit, Ariane, 2004. "Bilateral donors' aid allocation decisions--a three-dimensional panel analysis," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 253-274.
    15. Harrigan, Jane & Wang, Chengang, 2011. "A New Approach to the Allocation of Aid Among Developing Countries: Is the USA Different from the Rest?," World Development, Elsevier, vol. 39(8), pages 1281-1293, August.
    16. Winters, Matthew S. & Martinez, Gina, 2015. "The Role of Governance in Determining Foreign Aid Flow Composition," World Development, Elsevier, vol. 66(C), pages 516-531.
    17. Younas, Javed, 2008. "Motivation for bilateral aid allocation: Altruism or trade benefits," European Journal of Political Economy, Elsevier, vol. 24(3), pages 661-674, September.
    18. M. Adnan Kabir & Najib Alam, 2021. "The Efficacy of Democracy and Freedom in Fostering Economic Growth," Emerging Economy Studies, International Management Institute, vol. 7(1), pages 76-93, May.
    19. 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.
    20. Emmanuel Frot & Javier Santiso, 2011. "Herding in Aid Allocation," Kyklos, Wiley Blackwell, vol. 64(1), pages 54-74, February.
    21. Acht, Martin & Mahmoud, Toman Omar & Thiele, Rainer, 2015. "Corrupt governments do not receive more state-to-state aid: Governance and the delivery of foreign aid through non-state actors," Journal of Development Economics, Elsevier, vol. 114(C), pages 20-33.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stubbs, Thomas H. & Kentikelenis, Alexander E. & King, Lawrence P., 2016. "Catalyzing Aid? The IMF and Donor Behavior in Aid Allocation," World Development, Elsevier, vol. 78(C), pages 511-528.
    2. Rudolph, Alexandra, 2017. "The concept of SDG-sensitive development cooperation: implications for OECD-DAC members," IDOS Discussion Papers 1/2017, German Institute of Development and Sustainability (IDOS).
    3. Imen Ghattassi & David Dosso & Francisco Serranito, 2025. "Determinants of International Climate Finance: A Gravity Panel Model Approach," Working Papers hal-04984013, HAL.
    4. Dreher, Axel & Lang, Valentin & Reinsberg, Bernhard, 2024. "Aid effectiveness and donor motives," World Development, Elsevier, vol. 176(C).
    5. Abrams M E Tagem, 2017. "Analysing the determinants of health aid allocation in sub-Saharan Africa," Discussion Papers 2017-09, University of Nottingham, CREDIT.
    6. Masaki, Takaaki, 2016. "Coups d’État and Foreign Aid," World Development, Elsevier, vol. 79(C), pages 51-68.
    7. Iliana Olivié & Aitor Pérez, 2016. "Why don’t donor countries coordinate their aid? A case study of European donors in Morocco," Progress in Development Studies, , vol. 16(1), pages 52-64, January.
    8. Katharina Stepping, 2012. "The determinants of selection and allocation decisions for health assistance. Which role do health indicators play?," MAGKS Papers on Economics 201231, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    9. Souha El Khanji, 2022. "Donors’ Interest in Water and Sanitation Subsectors," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(2), pages 611-654, April.
    10. Nagae, Akira & Katayama, Hajime & Takase, Koichi, 2022. "Donor aid allocation and accounting standards of recipients," Economic Modelling, Elsevier, vol. 106(C).
    11. Shields, Robin & Menashy, Francine, 2019. "The network of bilateral aid to education 2005–2015," International Journal of Educational Development, Elsevier, vol. 64(C), pages 74-80.
    12. Baydag, Rena Melis & Klingebiel, Stephan & Marschall, Paul, 2018. "Shaping the patterns of aid allocation: a comparative analysis of seven bilateral donors and the European Union," IDOS Discussion Papers 22/2018, German Institute of Development and Sustainability (IDOS).
    13. Andreas Fuchs & Hannes Öhler, 2021. "Does private aid follow the flag? An empirical analysis of humanitarian assistance," The World Economy, Wiley Blackwell, vol. 44(3), pages 671-705, March.
    14. Zdeněk Opršal & Jaromír Harmáček, 2019. "Is Foreign Aid Responsive to Environmental Needs and Performance of Developing Countries? Case Study of the Czech Republic," Sustainability, MDPI, vol. 11(2), pages 1-16, January.
    15. Brech, Viktor & Potrafke, Niklas, 2014. "Donor ideology and types of foreign aid," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 61-75.
    16. de Felice, Damiano, 2015. "Diverging Visions on Political Conditionality: The Role of Domestic Politics and International Socialization in French and British Aid," World Development, Elsevier, vol. 75(C), pages 26-45.
    17. Liya Palagashvili & Claudia R. Williamson, 2021. "Grading foreign aid agencies: Best practices across traditional and emerging donors," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 654-676, May.
    18. Kafayat Amusa & Nara Monkam & Nicola Viegi, 2016. "The Political and Economic Dynamics of Foreign Aid: A Case Study of United States and Chinese Aid to Sub-Sahara Africa," Working Papers 201628, University of Pretoria, Department of Economics.
    19. Axel Dreher & Peter Nunnenkamp & Maya Schmaljohann, 2015. "The Allocation of German Aid: Self-interest and Government Ideology," Economics and Politics, Wiley Blackwell, vol. 27(1), pages 160-184, March.
    20. Daniele Pianeselli, 2016. "Does The one who pays the piper really call the tune? OECD and Chinese aid to infrastructure in Sub-Saharan Africa," Departmental Working Papers of Economics - University 'Roma Tre' 0204, Department of Economics - University Roma Tre.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:eurjdr:v:37:y:2025:i:3:d:10.1057_s41287-025-00695-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.