Reducing or Fueling: The Effect of EU International Aid Allocation on the Level of Corruption in Recipient Countries
Abstract and Figures
The existing literature on the effect of foreign aid on corruption in recipient countries has been controversial and contains methodological issues regarding the use of instrumental variables. In this thesis, based on the work of Carnegie and Marinov (2017), I utilize the EU Council presidency as the instrument to analyze the effects of EU aid on corruption in recipient former colonies until 2006. The results from the instrument variable approach show that while EU aid allocation reduced most types of corruption, the magnitudes of these effects were quite small. The different effects depending on the measurements of corruption were also revealed in the analysis. These results were confirmed by the following quantitative analyses of the contemporary history of EU sanctions against violations of human rights, democracy, the rule of law, and good governance, as well as the case of DRC in which the 2001 Belgian presidency had a concrete influence on aid allocation. The findings suggest EU aid conditionality does not have substantial effects to reduce corruption in recipient countries in comparison to the effects on other development issues such as democracy promotion and human rights improvement when donor countries have little interest to impose sanctions against corruption.
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