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

Paulo Francisco (), Sandrina B. Moreira () and Jorge Caiado ()
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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

The European Journal of Development Research, 2025, vol. 37, issue 3, No 7, 643-665

Abstract: 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.

Keywords: Official development assistance (ODA); Foreign aid; Allocation; Democracy; Corruption (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1057/s41287-025-00695-8

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