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Does Aid Unpredictability Weaken Governance? Evidence from Developing Countries
Author(s) -
Kangoye Thierry
Publication year - 2013
Publication title -
the developing economies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.305
H-Index - 30
eISSN - 1746-1049
pISSN - 0012-1533
DOI - 10.1111/deve.12008
Subject(s) - developing country , language change , incentive , corporate governance , aid effectiveness , predictability , politics , perspective (graphical) , public economics , development aid , business , economics , development economics , good governance , political science , economic growth , finance , market economy , art , physics , literature , quantum mechanics , artificial intelligence , computer science , law
This paper examines the effects of aid on governance from a different perspective by asserting that aid unpredictability can potentially increase corruption in recipient countries by providing incentives to risk‐averse and corrupt political leaders to engage in rent‐seeking activities. Analyses of data from 80 developing countries over the period 1984–2004 offer evidence that higher aid unpredictability is associated with more corruption as measured by a synthetic index. We also find further evidence that this latter impact is more severe in countries with weak initial institutional conditions. These findings are a supplementary advocacy for the need for better management and better predictability of aid flow in developing countries.