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

Martin Ambassa () and Motande I. MONDJELI MWA Ndjokou ()
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Martin Ambassa: Ecoresearch, Cameroon
Motande I. MONDJELI MWA Ndjokou: University of Maroua, FSEG, Cameroon

Region et Developpement, 2026, vol. 63, 25-45

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.

Keywords: Corruption; Fragile states; Income inequality; Foreign aid (search for similar items in EconPapers)
JEL-codes: C33 F35 H11 I3 O11 O55 (search for similar items in EconPapers)
Date: 2026
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