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Aid Dependence and the Quality of Governance: Cross‐Country Empirical Tests

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  • Stephen Knack

Abstract

Aid dependence can potentially undermine the quality of governance and public sector institutions by weakening accountability, encouraging rent‐seeking and corruption, fomenting conflict over control of aid funds, siphoning off scarce talent from the bureaucracy, and alleviating pressures to reform inefficient policies and institutions. Analyses of cross‐country data in this paper provide evidence that higher aid levels erode the quality of governance, as measured by indices of bureaucratic quality, corruption, and the rule of law. These findings support the need for donors to develop less costly and less intrusive ways of disseminating state‐of‐the‐art knowledge on public sector reform in developing countries.

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  • Stephen Knack, 2001. "Aid Dependence and the Quality of Governance: Cross‐Country Empirical Tests," Southern Economic Journal, John Wiley & Sons, vol. 68(2), pages 310-329, October.
    • Handle: RePEc:wly:soecon:v:68:y:2001:i:2:p:310-329
    DOI: 10.1002/j.2325-8012.2001.tb00421.x
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    2. Altunbaş, Yener & Thornton, John & Vasilakis, Chrysovalantis, 2023. "More Foreign Aid, Less Financial Development," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 76(4), pages 495-528.
    3. Koppenberg, Maximilian & Mishra, Ashok K. & Hirsch, Stefan, 2023. "Food aid and violent conflict: A review and Empiricist’s companion," Food Policy, Elsevier, vol. 121(C).
    4. Brice Kamguia & Sosson Tadadjeu & Clovis Miamo & Henri Njangang, 2022. "Does foreign aid impede economic complexity in developing countries?," International Economics, CEPII research center, issue 169, pages 71-88.
    5. Rachel M. Gisselquist & Patricia Justino & Andrea Vaccaro, 2023. "Do the effectiveness principles matter for development?: Evidence from aid effectiveness data," WIDER Working Paper Series wp-2023-60, World Institute for Development Economic Research (UNU-WIDER).
    6. Gnangnon, Sèna Kimm, 2023. "The Quality of Aid for Trade Flows and Economic Complexity," EconStor Preprints 271538, ZBW - Leibniz Information Centre for Economics.
    7. Maekawa, Wakako, 2024. "United Nations peacekeeping operations and multilateral foreign aid: Credibility of good governance," World Development, Elsevier, vol. 176(C).
    8. Huibo Pan & Lili Yao & Chenhe Zhang & Yuchi Zhang & Yuying Gao, 2024. "Research on Financial Poverty Alleviation Aid for Increasing the Incomes of Low-Income Chinese Farmers," Sustainability, MDPI, vol. 16(3), pages 1-24, January.
    9. Mandon, Pierre & Woldemichael, Martha Tesfaye, 2023. "Has Chinese aid benefited recipient countries? Evidence from a meta-regression analysis," World Development, Elsevier, vol. 166(C).
    10. Rachel M. Gisselquist & Patricia Justino & Andrea Vaccaro, 2024. "Do the principles of effective development co‐operation improve development outcomes? The case for clearer definitions and measurement," Development Policy Review, Overseas Development Institute, vol. 42(1), January.
    11. Al Bhimani & Mthuli Ncube, 2006. "Governance, Incentives and Elections as Determinants of Economic Performance, Aid and Investment Flows," Working Papers 025, Economic Research Southern Africa.
    12. Danny Cassimon & Olusegun Fadare & George Mavrotas, 2023. "The Impact of Food Aid and Governance on Food and Nutrition Security in Sub-Saharan Africa," Sustainability, MDPI, vol. 15(2), pages 1-19, January.
    13. Birendra Narayan Shah & Md Iqbal Bhuyan & Rukshana Salam & Kim Sungsik, 2022. "Foreign Aid and Economic Growth in South Asian Countries," Emerging Economy Studies, International Management Institute, vol. 8(1), pages 41-51, May.
    14. Srofenyoh, Francis Yao & Agyei-Henaku, Kofi Aaron Aboa-Offei & Badu-Prah, Charlotte & Agyeiwaa-Afrane, Akua & Gidiglo, Ferguson Korbla & Djokoto, Justice Gameli, 2023. "Aid-to-Production, Consumption and Agricultural Growth in Developing Countries," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 11(4), October.
    15. Sujin Cha, 2024. "Chinese aid and corruption in African local governments," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(1), pages 587-605, January.
    16. Pradhan, Rudra P. & Bennett, Sara E. & Nair, Mahendhiran S. & Arvin, Mak B., 2023. "Does foreign aid procurement in resource-rich countries depend on these countries’ financial development and institutional quality? Evidence from PVECM and quantile-on-quantile regression," Socio-Economic Planning Sciences, Elsevier, vol. 88(C).
    17. Koppenberg, Maximilian & Mishra, Ashok K. & Hirsch, Stefan, 2023. "Food Aid and Violent Conflict: A Review of Literature," IZA Discussion Papers 16574, Institute of Labor Economics (IZA).
    18. repec:ocp:rpaeco:pb_45-22 is not listed on IDEAS

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