Page 271 - Volume 2_CHANGES_merged_with links

Obstacles to progress

Distortions

*****
Aid & Corruption

“ The unexpected woes started with an Associated Press story entitled "Fraud plagues
global health fund" on January 23rd. It claimed that up to two-thirds of some grants went
astray, with "astonishing" corruption in some cases. It cited faked invoices, phoney

training events and other abuses, chiefly involving health ministries in some African
countries. For Fund insiders, that was nothing new: evidence of the misuse of $34m paid

out in Mali, Mauritania, Djibouti and Zambia became public knowledge in October. “
"Aid and Corruption: Cleaning Up." 320
Global Policy Forum (February 2011)

*****
“ There is no evidence whatsoever that less corrupt countries receive more Foreign Aid.
***
Consistently with evidence on other variables Scandinavian donors (the most generous

in per capita terms) do reward less corrupt receivers. On the other hand the US appear to
favor democracies, but seems to pay no attention whatsoever to quality of government

of receiving countries. We find some evidence that private flows, as opposed to official
flows, do a batter job at discriminating against more corrupt governments. “
"Do Corrupt Governments Receive Less Foreign Aid?" 321
Alesina, Alberto, and Beatrice Weder.
American Economic Review 92, no. 4 (August 1, 2002): 1126–37

*****

“ We document that aid disbursements to the most aid-dependent countries coincide
with significant increases in deposits held in offshore financial centers known for bank

secrecy and private wealth management. Aid capture by ruling politicians, bureaucrats
and their cronies is consistent with the totality of observed patterns: it can explain why
aid does not trigger flows to non-havens, why the capital outflows occur precisely in the

same quarter as the aid inflows and why the estimated effects are larger for more
corrupt countries. Other explanations are possible but we find them harder to reconcile

with all the patterns in the data. We cannot exclude that firms benefiting from aid-
sponsored spending receive payments in quarters with aid disbursements and deposit

the funds with foreign banks; however, this mechanism cannot explain why the money
only flows to havens. It seems even less likely that the results reflect profit shifting by