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Impact Of Foreign Aid On Corruption: An Econometric Case Study Of South Asia And East Asia

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  • Rahim Quazi
  • Arshad Alam
  • Sudhir Tandon

Abstract

An interesting area of research has emerged that explores the relationship between foreign aid and corruption in developing countries. Several studies have found that corruption is festered by rent seeking activities in the recipient countries when aid-funded resources are transferred without accountability at the decision makers’ discretion. On the other hand, several studies have concluded that foreign aid helps curb corruption by improving the quality of governance. This study uses 1996-2013 annual data from 14 developing countries in South Asia and East Asia to analyze the impact of aid on corruption. Results estimated in this study suggest that foreign aid has helped lower corruption in the sample countries and the impact of multilateral aid on curbing corruption is stronger than that of bilateral aid. In addition, rule of law, political stability and accountability are found to be strong deterrents of corruption. These results improve our understanding of the aid-corruption dynamics, which is critical for designing strategies to promote long-term economic efficiency in developing countries

Suggested Citation

  • Rahim Quazi & Arshad Alam & Sudhir Tandon, 2015. "Impact Of Foreign Aid On Corruption: An Econometric Case Study Of South Asia And East Asia," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 9(4), pages 17-30.
    • Handle: RePEc:ibf:gjbres:v:9:y:2015:i:4:p:17-30
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    Cited by:

    1. Suleiman Malik Faki & Prof. Fuzhong Chen, 2021. "Does Foreign Aid Influence Corruption? New Evidence in East Africa Community Member Countries," International Journal of Science and Business, IJSAB International, vol. 5(4), pages 46-58.
    2. Pierre E. Biscaye & Travis W. Reynolds & C. Leigh Anderson, 2017. "Relative Effectiveness of Bilateral and Multilateral Aid on Development Outcomes," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 1425-1447, November.

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    More about this item

    Keywords

    Foreign Aid; Corruption; South Asia; East Asia;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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