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Does Foreign Aid Improve Governance?

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  • Busse, Matthias
  • Groening, Steffen

Abstract

This paper analyses the impact of aid flows on governance. Using an instrumental variable approach and a large country sample, we find that aid has a negative rather than a positive influence on governance. This outcome is robust to various model specifications.

Suggested Citation

  • Busse, Matthias & Groening, Steffen, 2010. "Does Foreign Aid Improve Governance?," Proceedings of the German Development Economics Conference, Hannover 2010 6, Verein für Socialpolitik, Research Committee Development Economics.
    • Handle: RePEc:zbw:gdec10:6
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    References listed on IDEAS

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    1. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    2. Brautigam, Deborah A & Knack, Stephen, 2004. "Foreign Aid, Institutions, and Governance in Sub-Saharan Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 52(2), pages 255-285, January.
    3. World Bank, 2007. "World Development Indicators 2007," World Bank Publications - Books, The World Bank Group, number 8150, December.
    4. Raghuram Rajan & Arvind Subramanian, 2007. "Does Aid Affect Governance?," American Economic Review, American Economic Association, vol. 97(2), pages 322-327, May.
    5. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
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    More about this item

    Keywords

    Official Development Assistance; Governance;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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