Foreign aid and governance in Africa

S. Asongu, J. Nwachukwu

Research output: Contribution to journalArticle

84 Citations (Scopus)

Abstract

This paper investigates the effect of foreign aid on governance in order to extend the debate on foreign aid and to verify common positions from Moyo’s ‘Dead Aid’, Collier’s ‘Bottom Billion’ and Eubank’s ‘Somaliland’. The empirical evidence is based on updated data from 52 African countries for the period 1996–2010. An endogeneity robust instrumental variable Two-Stage-Least Squares empirical strategy is employed. The findings reveal that development assistance deteriorates economic (regulation quality and government effectiveness) and institutional (corruption-control and rule of law) governance, but has an insignificant effect on political (political stability, voice and accountability) governance. While, these findings are broadly in accordance with Moyo and Collier on weak governance, they neither confirm the Eubank position on political governance nor the Asongu stance on the aid-corruption nexus in a debate with Okada and Samreth. The use of foreign aid as an instrument to influence the election and replacement of political leaders in Africa may have insignificant results. It is time to solve the second tragedy of foreign aid and that economists and policy makers start rethinking the models and theories on which foreign aid is used to influence economic, institutional and political governance in recipient countries.
Original languageEnglish
JournalInternational Review of Applied Economics
VolumeIn press
DOIs
Publication statusPublished - 2015

Bibliographical note

This paper is not available on the repository

Keywords

  • foreign aid
  • political economy
  • development
  • Africa

Fingerprint Dive into the research topics of 'Foreign aid and governance in Africa'. Together they form a unique fingerprint.

Cite this