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Foreign Aid and Enlightened Leaders

  • Roland Hodler
  • Paul Raschky

To study whether foreign aid fuels personal, regional and ethnic favoritism, we use satellite data on nighttime light for any region in any aid-recipient country, and we determine for each year and each country the region in which the current political leader was born. Having a panel with 22,850 regions in 91 aid recipient countries with yearly observations from 1992 to 2005, we compare the effect of foreign aid on nighttime light across regions. We find that in countries with poor political institutions, this effect is significantly higher in the region in which the current political leader was born than in other regions. This finding suggests that a disproportionate share of foreign aid ends up in the leader's birth region, and we argue that it supports the view that foreign aid fuels favoritism, broadly defined. We find no such difference in aid-recipient countries with sound political institutions.

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File URL: http://www.buseco.monash.edu.au/eco/research/papers/2010/5410aidlighthodlerraschky.pdf
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Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 54-10.

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Length: 39 pages
Date of creation: May 2010
Date of revision:
Handle: RePEc:mos:moswps:2010-54
Contact details of provider: Postal: Department of Economics, Monash University, Victoria 3800, Australia
Phone: +61-3-9905-2493
Fax: +61-3-9905-5476
Web page: http://www.buseco.monash.edu.au/eco/Email:


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  1. Bjørnskov, Christian, 2010. "Do elites benefit from democracy and foreign aid in developing countries?," Journal of Development Economics, Elsevier, vol. 92(2), pages 115-124, July.
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