Foreign aid donors increasingly demand that aid is used efficiently and effectively. This study examines the effect of corruption levels, measured by the Corruption Perceptions Index, within a recipient country on the levels of economic growth. A growing literature outlines the mechanisms through which corruption impedes economic growth and is summarized within. Additionally, as longevity gains may result from foreign aid but are not captured in economic growth, this study computes a variable called the Life Quality Indicator (LQI) that combines such gains with economic growth and examines corruption’s effect on LQI growth. As any windfall, foreign aid has been argued to exacerbate problems within corrupt countries—causing economic decline. This study develops an interaction of corruption levels and the ratio of aid receipts to GDP to examine the effects of this interaction on economic growth and LQI growth. Conducting a regression analysis shows the relationships between the interaction term and economic growth and the interaction term and LQI growth are negative, leading to policy recommendations that corrupt countries not receive foreign aid.
Using game theory, this study predicts the outcomes of interactions between aid recipients and donors during the Cold War, post-Cold War, and in the present. The present predicted outcomes suggest that recipients will be the winners because they are able to choose between receiving aid from emerging donors and from the Development Assistant Committee (DAC). Policy guidance to the aid community includes understanding that emerging donors may exert influence on aid recipients and programs to monitor this influence ensuring that it does not become exploitation may be necessary.
Finally, a case study of Russia is presented, highlighting its corruption and foreign aid receipts in the post-Soviet timeframe. A separate analysis is conducted on the Former Soviet Union (FSU) countries to determine whether Russia’s corruption and foreign aid receipts caused lower levels of economic and LQI growth than that experienced by other FSU countries. While results do not show this, the negative relationship between the interaction term and economic and LQI growth is also found in this subset.
| Identifer | oai:union.ndltd.org:uky.edu/oai:uknowledge.uky.edu:msppa_etds-1005 |
| Date | 01 January 2013 |
| Creators | Deerfield, Amanda |
| Publisher | UKnowledge |
| Source Sets | University of Kentucky |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | Theses and Dissertations--Public Policy Administration |
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