The effect of foreign aid on corruption: A quantile regression approach

Okada, Keisuke and Samreth, Sovannroeun (2011): The effect of foreign aid on corruption: A quantile regression approach.

Abstract

This paper investigates the effect of foreign aid on corruption using a quantile regression method. Our estimation results illustrate that foreign aid generally lessens corruption and, in particular, its reduction effect is larger in countries with low levels of corruption. In addition, considering foreign aid by donors, our analysis indicates that while multilateral aid has a larger reduction impact on corruption, bilateral aid from the world’s leading donors, such as France, the United Kingdom, and the United States, has no significant effect on corruption. However, bilateral aid from Japan is shown to be statistically significant in lessening corruption.

• Item Type: MPRA Paper
• Language: English
• Keywords: Foreign Aid; Corruption; Quantile Regression
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy ; Administrative Processes in Public Organizations ; Corruption; F - International Economics > F3 - International Finance > F35 - Foreign Aid

References

Adserà, A., Boix, C., Payne, M., 2003. Are you being served? political accountability and quality of government. Journal of Law, Economics, and Organization, 19, 445-490.

Alesina, A., Weder, B., 2002. Do corrupt governments receive less foreign aid? American Economic Review 92, 1126-1137.

Billger, S. M., Goel, R. K., 2009. Do existing corruption levels matter in controlling corruption? cross-country quantile regression estimates. Journal of Development Economics 90, 299-305.

Djankov, S., Montalvo, J. G., Reynal-Querol, M., 2008. The curse of aid. Journal of Economic Growth 13, 169-194.

Gomanee, K., Girma, S., Morrissey, O., 2005. Aid, public spending and human welfare: evidence from quantile regressions. Journal of International Development 17, 299-309.

Gomanee, K., Morrissey, O., Mosley, P., Verschoor, A., 2005. Aid, government expenditure, and aggregate welfare. World Development 33, 355-370.

Knack, S., 2001. Aid dependence and the quality of governance: cross-country empirical tests. Southern Economic Journal 68, 310-329.

Koenker, R., Bassett Jr., G., 1978. Regression quantiles. Econometrica 46, 33-50.

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., Vishny, R., 1999. The quality of government. Journal of Law, Economics, and Organization, 15, 222-279.

Serra, D., 2006. Empirical determinants of corruption: a sensitivity analysis. Public Choice 126, 225-256.

Svensson, J., 2000. Foreign aid and rent-seeking. Journal of International Economics 51, 437-461.

Tavares, J., 2003. Does foreign aid corrupt? Economics Letters 79, 99-106.

Treisman, D., 2000. The causes of corruption: a cross-national study. Journal of Public Economics 76, 399-457.