On the Effectiveness of Foreign Aid in Institutional Quality

European Economic Letters, 2(1), pp. 12-19 (2013).

13 Pages Posted: 9 Sep 2014 Last revised: 1 Apr 2015

See all articles by Simplice Asongu

Simplice Asongu

African Governance and Development Institute

Date Written: August 8, 2013

Abstract

We extend the Okada & Samreth (2012, EL) and Asongu (2012, EB) debate on ‘the effect of foreign aid on corruption’ by: not partially negating the former’s methodological underpinning (as in the latter’s approach) with a unifying empirical framework and; broadening the horizon of inquiry from corruption to eight institutional quality dynamics (rule of law, regulation quality, government effectiveness, democracy, corruption, voice & accountability, control of corruption and political stability). Core to this extension is a hypothetical contingency of the ‘institutional perils of foreign aid’ on existing institutional quality such that, the institutional downside of development assistance maybe questionable when greater domestic institutional development has taken place. Based on the hypothesis of institutional thresholds for foreign aid effectiveness, the perilous character of development assistance to institutional quality is broadly confirmed in 53 African countries for the period 1996-2010.

Keywords: Foreign Aid; Political Economy; Development; Africa

JEL Classification: B20; F35; F50; O10; O55

Suggested Citation

Asongu, Simplice, On the Effectiveness of Foreign Aid in Institutional Quality (August 8, 2013). European Economic Letters, 2(1), pp. 12-19 (2013). . Available at SSRN: https://ssrn.com/abstract=2493351 or http://dx.doi.org/10.2139/ssrn.2493351

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

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