"Do Corrupt Governments Recieve Less Foreign Aid?"

Alesina, Alberto, and Beatrice Weder. "Do Corrupt Governments Recieve Less Foreign Aid?" American Economic Review 92 (2002): 1126-1137.

Looking at Per Capita Income in different countries, the United States income is about 50 times larger than in Mali and is 60 times larger than in Ethiopia.  As a result of this, the developing countries ask for money from the richer, developed countries.  There are many international programs that do this, and their goal is not only to help alleviate poverty in these countries, but also to reward high-quality policies, and efficient and truthful governments.  In 1998, the World Bank described their debt incentive as making sure that countries show evidence of “sustained implementation of…economic reform progress.”  The World Bank also stated, “There is no value in providing large amounts of money to a country with poor policies.” 

Aid program critics feel that corrupt governments with low-quality policies receive just as much financial assistance as less corrupt governments.  In 1998, the World Bank said, “financial assistances often does not reach the really needy developing countries, but instead is wasted in inefficient public consumption.  Arguers also say that not only are corrupt governments not being discriminated against as they should, but the money they receive often causes more fights between the countries different groups.  Alessandra Casella and Barry Eichengreen argue foreign aid may be counterproductive if it delays the adaptation of policy reforms. (1996)

The research done by the authors, Alesina and Weder, show that there is no evidence of less corrupt governments receiving more financial aid than their more corrupt counterparts.  Their data never uncovered any evidence of a negative effect of corruption on foreign financial aid.  They did find differences in the monetary amounts donors gave.  Alesina and Weder found Scandinavian donors to be the most generous and they also seem to reward less corrupt governments. They also found that the United States appears to favor democracies, but does not seem to pay any attention to quality of government in these receiving countries.  It is also possible for a country who receives financial aid in a particular year to become more corrupt the next year and also receive more aid.  However, while possible, it is hardly likely.