Elite Capture of Foreign Aid: Evidence from Offshore Bank Accounts

Do elites capture foreign aid?

From:
Foreign, Commonwealth & Development Office
Published
18 February 2020
Document Type:
Working Paper
Theme:
Governance and Conflict
Authors:
Andersen, J.J., Johannesen, N, Rijkers, B

Abstract

Do elites capture foreign aid? This paper documents that aid disbursements to highly aid-dependent countries coincide with sharp increases in bank deposits in offshore financial centers known for bank secrecy and private wealth management, but not in other financial centers. The estimates are not confounded by contemporaneous shocks such as civil conflicts, natural disasters, and financial crises, and are robust to instrumenting with predetermined aid commitments. The implied leakage rate is around 7.5 percent at the sample mean and tends to increase with the ratio of aid to GDP. The findings are consistent with aid capture in the most aid-dependent countries.

This is an output of the World Bank’s Strategic Research Program

Citation

Andersen, Jorgen Juel; Johannesen, Niels; Rijkers, Bob.(2020). Elite Capture of Foreign Aid : Evidence from Offshore Bank Accounts. Policy Research working paper;no. WPS 9150; Washington, D.C. : World Bank Group.

Elite Capture of Foreign Aid: Evidence from Offshore Bank Accounts

Published 18 February 2020
Contents