 Foreign aid - a fillip for development or a fuel for corruption?Keith Blackburn and Gonzalo Forgues-Puccio () Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester Abstract: We present an analysis of the e¤ects of foreign aid on economic development when the quality of governance may be compromised by corruption. The analysis is based on a dynamic general equilibrium model in which growth is driven by capital accumulation and public policy is administered by government-appointed bureaucrats. Corruption may arise due to the opportunity for bureaucrats to embezzle public funds which are otherwise used to provide productive public goods and services. Our main results may be summarised as follows: (1) corruption impedes economic development and compromises the effectiveness of aid programmes; (2) the incidence of corruption may, itself, be affected by both the development process and the donation of aid; (3) foreign aid is good for development when governance is good, but may be bad (perhaps very bad) for development when governance is bad; and (4) corruption and poverty may co-exist as permanent, rather than just transitory, …fixtures of an economy. Pages: 40 pages Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:man:cgbcrp:158 Access Statistics for this paper More papers in Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester Contact information at EDIRC. |
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