Can donors prevent aid misallocations? Evidence from Chinese and World Bank aid

We estimate to what extent international aid projects are subject to favoritism. We compare two different sources: Chinese aid and World Bank aid, using differences in differences and RDD estimates based on the dates of presidential turnovers. Consistently with the literature, we find Chinese aid massively targets the region of birth of new presidents, concentrating in its large urban centers but not necessarily in the district of birth of the president. However, we also find some evidence of a less visible and less intense form of favoritism for World Bank aid: it targets areas co-ethnic with a new president without following main regional administrative borders. Finally, this pattern of World Bank aid disappears with democratization, which contrasts with Chinese aid also following the place of birth of presidents in democracies.