Working Paper 137 - Does Aid Unpredictability Weaken Governance? New Evidence from Developing Countries

Thierry Kangoye ()
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Thierry Kangoye: African Development Bank, Postal: 15 Avenue du Ghana P.O.Box 323-1002 Tunis-Belvedère, Tunisia, https://www.afdb.org/en/knowledge/publications

Working Paper Series from African Development Bank

Abstract: This paper revisitates the effects of aid on governance from a different prospect, by upholding that aid unpredictability can potentially increase corruption in recipient countries through increased incentives from political leaders that are risk averse and corrupt, to engage in rent-seeking activities. Empirical investigation with data from 67 developing countries over1984-2004 provides supportive evidence that higher aid unpredictability is associated with more corruption as measured by a synthetic index. Coherently with some studies, we also found that aid dependency is on average associated with less corruption. These findings are a supplementary advocacy for the need to have a better predictability of aid.

Date: 2011-09-20
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