19 February 2021

Do elites capture foreign aid?

Niels Johannesen presented recent research at Stanford University on 17 February.

The research 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% 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.

You can read the working paper "Elite Capture of Foreign Aid: Evidence from Offshore Bank Accounts" here