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The effects of foreign aid on income inequality in Africa and the role of corruption

Author

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  • Martin AMBASSA

    (Ecoresearch, Cameroon)

  • Motande I. MONDJELI MWA NDJOKOU

    (University of Maroua, FSEG, Cameroon)

Abstract

This article examines the impact of foreign aid on income inequality (measured by the Gini coefficient) and the specific role of corruption in fragile and conflict-affected countries in Africa. Using data covering 17 countries over the period 1989–2022, we employed a fixed-effects model with Driscoll-Kraay standard errors, as well as instrumental variables, to assess the effects of foreign aid on income inequality. Two major conclusions emerge from our results. First, foreign aid, particularly development aid and aid in the health and education sectors, contributes significantly to inequality reduction. Conversely, humanitarian aid has no notable effect on income distribution. Second, a mediation analysis based on a structural equation model reveals that corruption affects the effectiveness of foreign aid: the higher the levels of corruption, the more beneficial effects of aid on inequality diminish. Seeking peaceful solutions to conflicts and establishing strong, independent institutions capable of sanctioning corrupt practices appear essential to fully ensure the impact of foreign aid on reducing inequality.

Suggested Citation

  • Martin AMBASSA & Motande I. MONDJELI MWA NDJOKOU, 2026. "The effects of foreign aid on income inequality in Africa and the role of corruption," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 63, pages 25-45.
    • Handle: RePEc:tou:journl:v:63:y:2026:p:25-45
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    Keywords

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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