Abstract
This paper revisits the debate on foreign aid effectiveness from a different perspective by analysing the role of institutional corruption on the effect of aid volatility on the output of developing nations. A simple political economy model is developed to show the effect of corruption on rent-seeking activities of incumbent legislators and their subsequent effect on country output. This phenomenon is empirically tested using data on 77 aid-receiving countries from the span of 1984 to 2007 using GMM to control for potential endogeneity.
| Original language | English |
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| Pages (from-to) | 1159-1169 |
| Number of pages | 11 |
| Journal | Economics Bulletin |
| Volume | 33 |
| Issue number | 2 |
| Publication status | Published - 2013 |